Children: Obesity
	 — 
	Question

Lord Sharkey: To ask Her Majesty's Government what assessment they have made of the factors contributing to the rise in childhood obesity.

Earl Howe: My Lords, obesity is a complex issue, and there are many factors that contribute to children becoming obese. We are committed to tackling obesity in children. Our call to action on obesity sets out the actions that everyone needs to take. For our part we will continue investing in the Change4Life programme, the national child measurement programme, and the School Games.

Lord Sharkey: My Lords, one-third of our children are already obese, and the fact is that cheap fast food can be a major contributor to obesity. The Government's responsibility deal for calorie reduction has signed up 31 companies, which have promised to reformulate their products to make them less fattening. However, according to the Department of Health's website, not one of these signatories is a fast-food operator. Does this not suggest a failure of the voluntary approach and that we need regulation, as the BMA says, to make food companies play their proper part in reducing obesity?

Earl Howe: My Lords, I am grateful to my noble friend. In fact, the responsibility deal has led to a number of very important gains and benefits, not least from food companies: food retailers as well as food manufacturers. Calorie labelling, for example, has expanded rapidly in out-of-home settings; we now have labelling in around 9,000 outlets across the country, which is to be welcomed. As my noble friend said, 31 companies, some of them household names, have signed up to the responsibility deal calorie reduction pledge. However, this is an area that we continue to work on, and I think my noble friend's comments are well placed.

Lord Wigley: My Lords, will the Minister accept that in Wales the figures for childhood obesity in those aged between 2 and 15 are three percentage points worse than those in England? As responsibility for some aspects of these matters is devolved and for others is not, can his department take up with the Government of Wales in Cardiff how a coherent plan can be undertaken to tackle this?

Earl Howe: My Lords, the noble Lord will understand that we tread warily when it comes to interfering in the affairs of the devolved Administrations. However, I take his point, because on serious public health messages such as this we need to have a co-ordinated approach. Members of my department are in regular contact with their counterparts in Wales.

Baroness Massey of Darwen: My Lords, the Minister mentioned sport. Beneficial as it is, does he accept that obesity is caused overwhelmingly by overeating and eating foods that cause obesity? Are there any media initiatives to direct young people to what is healthy to eat and to foods that cause less obesity, as well as to sports programmes?

Earl Howe: I completely agree with the noble Baroness that for children especially, exercise and sport are vital, which is why there are a number of initiatives in that area. She asked about media campaigns. Change4Life continues to support families to make simple changes to adopt a healthier diet and increase their physical activity levels. We are currently planning a summer campaign to encourage physical activity in children. The campaign remains subject to formal approval but is very much in our minds. Change4Life, I would just add, uses the full range of communication channels, including TV advertising, press, and local supporter activity. It is a well known brand and we intend to stick with it.

Lord Eden of Winton: My Lords, does not the Answer to the first Question on the Order Paper really depend upon the plans that the Minister will deploy before the House in his Answer to the second Question?

Earl Howe: Yes, my Lords, it is very much linked.

Lord Collins of Highbury: My Lords, I am going to take two bites of the cherry because I shall also briefly address the second Question. The noble Lord, Lord McColl, constantly reminds me that eating too many calories, not simply not exercising, is what causes me to be overweight, although I do exercise. However, when I pick up and eat a tub of low-fat yoghurt, which I have been doing for the past few years, thinking that I am eating healthily, I have not been able to read the very small print that states that this "low-fat, healthy" tub of yoghurt is packed full of sugars and calories. Actually, just before Christmas, I stopped eating low-fat yoghurts and I hope that noble Lords will appreciate the effect it has had on me. However, my specific question is: when will the noble Earl take the necessary statutory steps to ensure proper food labelling?

Earl Howe: My Lords, as the noble Lord will know, food labelling is largely governed by EU law and, at the moment, the EU directive is permissive about front-of-pack labelling. However, I take his point that it is very important that consumers are properly informed about what they are eating, and we are working with food manufacturers and retailers to ensure that there is much greater transparency in this area, across the piece, whether it relates to sugar, fats or salt.

Baroness Trumpington: My Lords, perhaps I may ask the Minister two questions. First, does he not agree that cheap food has become far more delicious than it was in the youth of most people in this Chamber? Secondly, children like to copy their heroes. Could not the media be persuaded to make greater use of physical heroes, such as footballers, tennis players or any kind of sporting hero, in order to promote less obesity?

Earl Howe: My noble friend makes a very good point about role models. To a certain extent, that has been tried and tested in the past with some success. As regards food and its taste, I would say each to their own, but she is right that we are encouraged in all sorts of subtle ways to eat more than we used to in years gone by. The responsibility deal calorie reduction pledge specifically enables businesses to contribute to our challenge to the nation in this area, which we issued as part of the call to action on obesity in 2011, to reduce total calorie consumption by 5 billion calories a day.

Health: Sugar Consumption
	 — 
	Question

Lord Rennard: To ask Her Majesty's Government what plans they have to help people reduce their sugar consumption.

Earl Howe: My Lords, we have challenged business, through our responsibility deal calorie reduction pledge, to take action to help people eat fewer calories. This can include helping reduce sugar consumption. Businesses are already taking action; for example, soft drinks manufacturers which are signed up to the calorie reduction pledge are reducing sugar and calories in their drinks, and we are looking to others to join force.
	The Government are also helping consumers to reduce their calorie intake by providing practical advice through NHS Choices and via the Change4Life campaign.

Lord Rennard: My Lords, does the Minister agree with the Secretary of State for Health that legislation may be required in this area if other measures do not succeed? In the mean time, does he think consideration needs to be given to changing tax regimes so that the tax may be rather higher on very sugary soft drinks, and rather lower on drinks that are less full of sugar? Does he also think that we may need to restrict the amount of sugar provided in some products, such as breakfast cereals targeted at children, so that parents either as consumers themselves or watching their children can see how many spoons of sugar are going on to their cereal, rather than simply accepting the amount of sugar already produced by the manufacturers?

Earl Howe: My noble friend asks a number of questions. I am sure he will have welcomed, as I did, the announcement a few days ago by two major manufacturers of sugary drinks that they were substantially reducing the sugar content of their drinks. This is in part a result of the engagement that we have had with the food industry, which, in public health terms, is taking on responsibility for the products that it makes.
	While there are advocates for taxation, in 2012 my department reviewed the international evidence of the effect of taxation on people's consumption of food and drink. There is very limited empirical evidence, certainly from literature, but also in practice that that has an effect on body weight or health outcomes. There is a range of possible unintended consequences, including swapping for other foods which may be even less healthy than the ones that we are trying to cut out.

Lord McColl of Dulwich: My Lords, is the Minister aware that the overeating habits of pregnant women can be programmed into the foetus, so that when born the children will not stand a chance unless people accept that the answer to the obesity epidemic is to eat less? Although exercise is important in reducing cholesterol, for well-being and so on, it has very little to do with the control of the obesity epidemic.

Earl Howe: My noble friend makes a good point, but in healthy children exercise is very important as a preventive measure for obesity and diabetes. The central point he makes is absolutely right. We look to healthcare workers, not only health visitors but also midwives, through programmes such as the Healthy Child programme and Start for Life, to get families and children off to the right start, so that they eat properly and live healthy lifestyles.

Baroness Masham of Ilton: My Lords, does the Minister think sweeteners are a good substitute for sugar or do they have side effects?

Earl Howe: My Lords, we are clear that artificial sweeteners are safe if taken as intended. That is the advice of the European Food Safety Authority and we take that advice. However, encouraging people to take low-diet fizzy drinks, for example, in preference to sugary drinks is problematic because all fizzy drinks have an adverse effect on tooth enamel. We need to be balanced in our messages but we think that artificial sweeteners have a role in a proper calorie-controlled diet.

Lord Berkeley: My Lords, are the Government aware of a study by the Dutch Government which links obesity with exercise-in particular, walking or cycling-in inverse proportion? Given that the same study says that we are the most obese country in Europe, will he encourage cycling to be taken up by more children and persuade the Department for Transport to take this a bit more seriously by get moving in encouraging more children to cycle to and from school and for leisure?

Earl Howe: I am sure that that is a message which I should take back to my colleagues in the Department for Transport, and I will gladly do so.

Lord Roberts of Llandudno: My Lords, we have already heard mention of the importance of the proper labelling of foods. Could that labelling be such that even the youngest child, perhaps with type 1 diabetes, would be able to understand it without having to go into some mathematical equation to decide exactly what is good for him to eat?

Earl Howe: My Lords, my noble friend may know that a UK-wide consultation on front-of-pack labelling was held last year. We published a formal response to it at the end of January. The responses identified a number of issues which we need to consider further and officials are working on those. However, my noble friend is absolutely right that not just the calorie content but the clarity of the messages around calories need to be clear not only to adults but to children.

Lord Brooke of Alverthorpe: Does the noble Earl know that drinking alcohol is a big factor in introducing sugar into the body? The drinks industry is totally exempt from any requirement to show the calorific effect of alcohol, or indeed its energy factors. Is the Minister happy that the partners in the responsibility deal within the drinks industry are taking no action on that issue, or is he prepared to say that the Government will push through the responsibility deal to try to bring about some change?

Earl Howe: My Lords, our alcohol strategy includes a commitment for the Responsibility Deal Alcohol Network to seek to make further progress on including energy information as part of the responsibility deal alcohol-labelling pledge. We have already secured provisions in recent EU labelling legislation that will enable companies to provide this information on a voluntary basis. The pledge on improving information for consumers in the off-trade area already includes a commitment to raise awareness of the energy content of alcoholic drinks, and we will continue along those lines.

House of Lords: Reform
	 — 
	Question

Lord Howarth of Newport: To ask Her Majesty's Government whether they intend to proceed with any reforms to the composition of the House of Lords.

Lord Hill of Oareford: My Lords, as noble Lords know, the Government have no further plans for legislation to reform this House in this Parliament.

Lord Howarth of Newport: My Lords, given that the House of Commons has made it absolutely clear that it will not tolerate the challenge to its primacy of an elected second Chamber, given the Deputy Prime Minister's sensible acknowledgement that the best is the enemy of the good and given the undesirability in the interests of good government that the question of Lords reform should overshadow the next Parliament, will Ministers introduce legislation in this Parliament to enable us to resolve the issues of how Members are to be appointed to the House of Lords, the future size of the House, how the balance between the political parties, the Cross Benches and the Lords spiritual is to be determined, the future of hereditary membership and life peerages, and provision for retirement and disqualification, all of which need to be resolved and upon which sufficient consensus could be achieved?

Lord Hill of Oareford: Having picked my way around this landscape over the past few weeks and having had the chance to talk to and understand the concerns of many noble Lords, I am not sure that it would be as easy to secure consensus as the noble Lord, Lord Howarth of Newport, suggests. He is clearly a great optimist if he believes that that is the case not only in this House but between this House and the other place. I obviously understand the points that many noble Lords raised about some of these issues that we discuss but, in the light of last year's debate and the views that the Deputy Prime Minister has made clear, there is no prospect of further legislation for those issues that would require legislation.

Lord Laming: Bearing in mind the financial situation and the concerns expressed all round about the impact of that on the poorest people in our society, does the Leader of the House agree that it would not enhance the reputation of this House for public funds to be used to encourage people to give up the privilege of serving in this House?

Lord Hill of Oareford: I agree personally and in principle with the point raised by the noble Lord, Lord Laming. When the rest of the country is facing huge economic challenges, as the noble Lord said, to spend taxpayers' money in such a way would be difficult, but I also agree with the underlying point of principle, which is that it is an honour and a privilege to serve in this House, and the idea that if one ceased to want to fulfil that honour and privilege, one would need to be compensated financially, sits oddly with the principle it serves.

Lord Forsyth of Drumlean: My Lords, in his role as Leader of the House and as the representative of this House in Cabinet, will my noble friend take the opportunity to draw to the attention of the Prime Minister the article in today's Times by the Lord Speaker, and impress on him that it represents the feelings of the vast majority of people in this House? Further, will he talk to the Deputy Prime Minister and say to him that his refusal to allow the Steel Bill to go forward is unacceptable, given the strength of feeling shown in both Houses about the size of the Houses of Parliament and the importance of getting value for taxpayers' money?

Lord Hill of Oareford: My Lords, I am sure that all the points that have been raised in this debate are being seen by my colleagues in the Cabinet, including by my right honourable friends the Prime Minister and the Deputy Prime Minister. I understand the points raised about the size of this House. It is important to have the ability to refresh the House, bring in new talent and draw on the expertise for which this House is rightly renowned. One of the reasons why I was particularly keen to do this job is because I saw as a Minister the difference between this House and another place in terms of the quality of the scrutiny that this House provides, and it is extremely important that we should carry on having the Members to enable us to do so.

Baroness Hayman: My Lords, will the Leader reconsider the pessimism implicit in his original reply? It is intolerable that the failure of the Government's plans for an elected House should stand in the way of progress on a reform agenda that is widely supported and which is urgently needed for the reputation of this House. The noble Lord could do the House a great service by championing that reform agenda, as the noble Lord, Lord Forsyth, said. Will he undertake so to do?

Lord Hill of Oareford: My Lords, I hope that I can always be a champion of this House, about which I feel extremely strongly. On the point about me being a pessimist, I like to think that I am an optimist. I am optimistic about this House, about its future and about the contribution that it makes to our national debate. I have, though, to be realistic about the consequence of the debate and the votes that took place. We know that the other place said at some point that it was in favour of an elected House; it did not then will the means for that to happen. Given where we got to last October, I am not a pessimist but I am realistic.

Lord Steel of Aikwood: Is the Leader of the House aware that following consultations with the Chief Whip, and as he rightly advised me, I postponed the Motion that I was to bring forward stopping further introductions until 28 February, which is the day before my Bill is next due to be blocked by the government Whips in the House of Commons. It would helpful if he, I and others could use the intervening time to try to persuade the powers that be at the other end that this is really a housekeeping measure purely affecting the Lords that we would like them to be nice enough to send back to us.

Lord Hill of Oareford: I understand that point. I have great respect for the noble Lord, Lord Steel, and am glad that I have already had the chance to discuss his proposals with him and others. I would be happy to do so again. He, I am sure, can use his powers of persuasion with colleagues in his own party, including the Deputy Prime Minister. I know that he will try and we will then see how we get on.

Lord Hunt of Kings Heath: My Lords, I would like to take him back to his first Answer. He suggested that it would be difficult to get a consensus in your Lordships' House on interim changes. Why does he not put it to the test? There are various groups meeting at the moment in this House discussing these matters. There is a great deal of consensus. Why does he not call those groups together, or have a Leader's Group, to see if we can make progress when there is a clear and huge majority of your Lordships' House in favour of making sensible interim changes?

Lord Hill of Oareford: Again, the noble Lord says there is a lot of consensus around this. The conversations I have had with people so far do not bear out that optimistic gloss. I am keen to talk to Members of this House who have views, and that is something I will continue to do.

Taxation: Avoidance
	 — 
	Question

Baroness Gardner of Parkes: To ask Her Majesty's Government what proposals they have to deal with any abuse of charitable status for the purposes of tax avoidance.

Lord Deighton: My Lords, an organisation must be a charity, under the law of England and Wales, and meet certain other conditions in order to qualify for UK charity tax reliefs. Whether an organisation established in England or Wales is a charity in law is a matter for the Charity Commission. The Government are considering the proposals of the noble Lord, Lord Hodgson, on updating charity law following his review of the Charities Act 2006.

Baroness Gardner of Parkes: I thank the noble Lord for that Answer. I notice that when you complete your tax return, one section asks you to say whether you are a member of a tax avoidance scheme. I am always amazed by that. That makes me wonder whether certain tax avoidance schemes are recognised and approved by the Treasury. Can the noble Lord tell me whether the Cup Trust, which is the one that has been so widely accused in the recent press, is known and approved by the Treasury, or whether it is unknown and that it has come as a shock to the Treasury to have this revelation in the press?

Lord Deighton: My Lords, I cannot comment on the tax affairs of individual taxpayers but what I can do is speak generally. Schemes that abuse the gift aid rules with a view to enabling individuals to avoid tax do fall within the disclosure of tax avoidance schemes rules. That means that anyone who uses such a scheme must disclose it on their tax return. HMRC can then identify those individuals and challenge the reliefs claimed where appropriate.

Lord Davies of Oldham: My Lords, are not the charities that most significantly avoid tax on dubious grounds the public schools? Many of them were granted charitable status when they educated the poor or those of middling incomes. They now clearly educate, overwhelmingly, the children of the wealthy and the privileged, as evidenced by the Conservative Front Bench in the Commons.

Lord Deighton: As I said in my original Answer, the issue of whether an organisation qualifies as a charity is for the Charities Commission. The review of the noble Lord, Lord Hodgson, which reported in the middle of 2012, was given an initial response by the Government just before Christmas. The Public Administration Select Committee is also looking at this and will report, I think, in March. At that point the Government will give their further recommendations on the regulation of the charities sector. That will deal with the issue of which organisations qualify as charities, including public schools.

Lord Strasburger: My Lords, can my noble friend tell the House whether alleged tax avoidance schemes, such as those operated by the Cup Trust, are likely to be caught by the general anti-avoidance rules when they are introduced? Can he also confirm that the general anti-avoidance rules are still scheduled to be introduced in this year's Finance Bill?

Lord Deighton: I thank my noble friend for giving me the chance to shed further light on this issue. HMRC is extremely clear that circular schemes which are designed to exploit gift aid do not work in tax law. It will challenge and litigate enthusiastically against any scheme that it believes does not work in tax law. As the schemes do not work in tax law, the anti-avoidance provisions are not necessary and the schemes should fall at the first hurdle of not being legally acceptable. However, I can confirm that it is the Government's intention to include the general anti-avoidance rules as part of the Finance Bill 2013.

Lord Richard: My Lords, does the Minister agree that it is a principle of English law that that which is not forbidden is permitted? Do not the Government recognise that merely to go on bleating from the sidelines and telling people that they should not avoid tax will have absolutely no effect whatever? Clever lawyers will be able to devise ways of continuing to avoid tax. If the Government want to deal with tax avoidance, they will have to legislate to deal with tax avoidance and stop preaching from the sidelines.

Lord Deighton: The Government are prepared to legislate against tax avoidance in the area of charities law. In both 2004 and 2010, Governments legislated to do precisely that. I see this as two distinct areas. On the one hand, we need to create a tax regime which encourages an enterprise economy and giving to charity. On the other hand, the quid pro quo for that kind of positive environment is that people pay their taxes. I can assure the House that HMRC will pursue diligently those who seek to avoid tax.

Lord Lexden: In relation to the Question from the Labour Front Bench, will my noble friend note that independent schools provide far more in bursaries and means-tested scholarships than they receive in benefits through their charitable status?

Lord Deighton: I thank my noble friend for that important addition to the debate. I was not aware of that but I am delighted that he has been able to share it with the House.

Lord Empey: What is the role of the Charity Commission in this? If an organisation pays out to good causes only less than 1% of its revenue, does an alarm bell ring somewhere?

Lord Deighton: In this particular case, as I understand it, the Charity Commission, which works closely with HMRC, investigated the trust but found that it did not have the legal basis to make a challenge. In that context, I refer to the review of the noble Lord, Lord Hodgson, the follow-up from the Government and the announcement made in the other House this morning that the focus of the new chairman, Mr Shawcross, should be on its role as a regulator.

Hereditary Peers By-Election
	 — 
	Announcement

The Clerk of the Parliaments announced the result of the by-election to elect a Conservative hereditary Peer in the place of the late Earl Ferrers in accordance with Standing Order 10.
	Forty-six Lords completed valid ballot papers. A paper setting out the complete results is being made available in the Printed Paper Office. That paper gives the number of votes cast for each candidate. The successful candidate was Viscount Ridley.

Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2012
	 — 
	Motion to Approve

Moved By Lord McNally
	That the draft Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2012 laid before the House on 26 November 2012 be approved.
	Relevant Document: 13th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 8 January.
	Motion agreed.

Prisons (Property) Bill
	 — 
	Order of Commitment Discharged

Moved By Lord Ramsbotham
	That the order of commitment be discharged.

Lord Ramsbotham: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.
	Motion agreed.

Growth and Infrastructure Bill

11th Report from the Delegated Powers Committee
	10th Report from the Constitution Committee

Committee (5th Day)

Relevant documents: 11th Report from the Delegated Powers Committee, 10th Report from the Constitution Committee.
	Clause 27 : Employee owners
	Amendment 81D
	 Moved by Lord Pannick
	81D: Clause 27, page 34, line 15, at end insert-
	"(d) the conditions regulating the agreement contained in subsection (12) are satisfied."

Lord Pannick: My Lords, Amendments 81D and 92 are in my name and that of the noble Lord, Lord Adonis. They are in the first of a series of groups of amendments which address Clause 27. As your Lordships know, Clause 27 allows employers to buy off employment rights otherwise enjoyed by employees. Under this clause, employees can agree to receive shares worth at least £2,000, in return for which they will lose the right to claim unfair dismissal, the right to claim statutory redundancy pay, the right to request flexible working and the right to request time off for training.
	What is so objectionable about Clause 27 is that these employment rights were conferred by Parliament over the past 50 years and have been protected by Governments-both Conservative and Labour-precisely because the inequality of bargaining power between employee and employer means that freedom of contract is quite insufficient to protect the employee or the prospective employee. Therefore, to allow these basic employment rights to be traded as some form of commodity frustrates the very purpose of these entitlements as an essential protection in the employment context.
	The concept contained in Clause 27 is especially bizarre when there appears to be no demand whatever from employers for such protection and when responsible employers are introducing genuine share ownership schemes. I can think of only one precedent for Clause 27. It is in Genesis, chapter 25, where Jacob refuses to let his famished brother Esau eat some of the broth he has made until he sells him his rights as the first born. Esau agrees because he is famished and says, "What use is my birthright to me?", compared to the mess of pottage of which he has immediate need. Your Lordships will come in due course to consider whether the correct response from your Lordships' House to this mess of pottage is to reject it in its entirety-for all the reasons so powerfully outlined at Second Reading by the noble Lord, Lord Adonis, in particular.
	Amendments 81D and 92 seek to ensure that if we are to have Clause 27 at all, the employee and the prospective employee must at the very least be given the minimum necessary protection to understand what it is that they are giving up. The minimum necessary protection that Amendments 81D and 92 would provide is that the statutory rights could be lost only if the agreement satisfies three essential conditions.
	The first is that any agreement in this context must be in writing and must set out the rights being traded and the value of the shares that are to be received. One of the surprising features of Clause 27 is that it does not even require the agreement to be in writing-an invitation to subsequent litigation if ever I saw one. Secondly, the individual must receive legal advice on the consequences of the agreement from an independent lawyer. These matters are surely too important for Parliament to allow employees and prospective employees to give up those basic rights without the legal implications being fully explained to them. The third essential protection is that the individual must have received financial advice from an independent adviser-who must be a regulated person-as to the value and the prospects of the shares that he or she is about to receive and for which they are giving up those basic employment rights
	The detail of Amendment 92 is modelled on Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 288 is a vital provision. It makes an agreement void if it purports to contract out of the employment rights that Parliament has conferred. At the moment, employees and employers simply cannot contract out of employment rights. Clause 27 conflicts with that basic and fundamental principle. However, Section 288 allows for compromise agreements to settle specific employment disputes in individual cases in employment tribunals. That is a very different concept and entirely acceptable in principle.
	Section 288 states that one of those compromise agreements in the context of an individual employment dispute is valid only if it is in writing and if the employee who is settling the case has received independent advice on the terms of the agreement by which he or she is settling the claim-advice from a lawyer, a trade union official or an advice centre worker. Clause 27 involves an agreement much more fundamental in its implications for the individual, who is not just settling an individual employment claim in the tribunal but is generally giving up important employment rights for the future. Therefore, in the Clause 27 context-if we are to have Clause 27 at all-the procedural protection that Parliament confers on the employee must be at least as strong as that which Parliament itself has conferred on the employee who is settling a specific employment claim.
	The Equality and Human Rights Commission has helpfully addressed that very issue. It has expressed concern that Clause 27 may indirectly and unlawfully discriminate, contrary to EU law, against those workers and prospective workers whose first language is not English, those with learning disabilities or young workers. Therefore, the commission says that a proper justification is required and that depends, in its view, on safeguards such as the receipt of informed and independent advice.
	I emphasise that Amendments 81D and 92 would not make Clause 27 acceptable. Clause 27 would remain a provision that knows the price of statutory employment rights but ignores the value of those rights. However, because the amendments would make Clause 27 marginally less objectionable, I beg to move.

Baroness Brinton: My Lords, on Second Reading I expressed my concerns about the whole concept behind this clause. Various Ministers have suggested that only a small group of companies are likely to be interested in these proposals: new, high-technology, rapid-growth, micro and small companies which might want to encourage employees into more commitment and endeavour by offering them shares in their company. So far, so good. However, many employers already do this in this sector, especially those running fast-growing, leading-edge, high-tech companies, because they know that they are going to grow much faster than many other companies and they want to commit their staff to working for them, to share the benefits in the longer term and the hardship of trials that most companies face in their start-up phase.
	I declare two past interests. First, I have a foster son who has recently been employed by one such firm, joining it from university. He has received a share package as part of his employment. I have talked to him and some of his colleagues about the benefits and whether they would be prepared to talk about giving up their rights. I will come to that later. My second interest is that I advised St John's College, Cambridge, as it created the St John's Innovation Centre in the late 1980s and subsequently was a non-executive director at the centre until 2010. The centre works with entrepreneurs and academics spinning their ideas out of Cambridge and other universities, offering them short-term leases and, very specifically, business, legal and technical advice that is the envy of many other science parks and innovation centres that have developed in the intervening 25 years.
	These companies are the exact target audience that Ministers tell us will be interested in the proposals in Clause 27. Having talked to the directors of these small but high-growth companies, I know that many already offer shares, as I mentioned. They, as directors, do not understand why an employer would want to do so in return for a reduction in employment rights. One of their key issues as the company grows is to keep the morale of the staff going during the difficult times. It is very rare for a new company to have an entirely smooth journey to success and reward. Proposing that staff should give up their rights to redundancy pay is an issue, as not all early-stage companies survive and so redundancy is a real possibility. They are also concerned about training. This is absolutely vital in the leading-edge technology sector, where the skills of your workforce are likely to make all the difference against your competitors, particularly the business skills that technical staff may not have had when they arrived at the company. They need those skills in order to progress in their market. Losing part of paternal leave is also a concern, as many of their staff are in exactly the age group likely to be beginning their families.
	So if the stick-that is, the loss of rights-is not attractive either to employers or to staff, what about the carrot? The carrot of capital gains tax exemption sounds very exciting but I do not believe that the Government have really understood the two likely outcomes for these high-tech companies. The first, sadly, I have already alluded to. Not all of these companies are a success. Probably one in 100 is. There is a chance that the company will not succeed and that the shares will be worthless.
	The second is the unlikely event that the company will do well enough to make those shares really worth something in the future. However, even this route is fraught to those coming in on the ground floor. Let us assume, for the sake of argument, that the group of employees who joined the company in its first two years were given shares at the then face value. It would not be unusual after their issue, as the company grows and faces all the typical excitements of launching in the market, for those shares to become worthless. But our fledgling company is taking off, and in order to become a really effective player, it will have to take on finance. It often needs to seek that finance when the company is not attractive. So, some business angels or venture capitalists invest in the company, and all the original shares are diluted substantially by this investment. We are only talking about round two of investment at this stage.
	Well, the rubric goes, it is better to have a small share of something than a larger share of nothing at all. Often, though, there are three or four subsequent rounds of financing, and those employees are likely to find that their small share becomes a minute one. This is a really risky business. Would many employees understand the risks that they were taking? Would they honestly be prepared to wait 10 years or more for the carrot of the CGT exemption for the one company in 50 to 100 that starts to make a return for its shareholders? I doubt it. I also doubt that many employees would understand the nature of the process that I have just outlined.
	That is why my noble friend Lord Tope and I have tabled Amendments 82A, 82B and 91 in this group. For people working in the financial services sector, such as venture capitalists and bankers, the process of growth and new share issues, with the consequential dilution for longstanding shareholders, is common knowledge, but for a young software engineer, perhaps fresh out of university, it is an area that they are likely to know nothing about The amendments in my name and that of my noble friend address this. We believe that employee shareholders under Clause 27 should have access to independent legal advice. More than that, we think that the employer should have a duty to ensure that the employee has a right to receive the appropriate legal advice and that the employer should make a contribution towards that legal advice.
	I am reminded of the small print in the public shares issues of the 1980s: shares can go up as well as down. The noble Baroness, Lady Thatcher-I am astonished to find myself praying her name in aid-felt that it was appropriate for the ordinary man or woman in the street to have that advice then, so I am sure that it is right to be provided in these circumstances for employees who are unlikely to have had training in the finer points of share prices and rounds of investment in high-growth companies.
	Amendment 92, in the names of the noble Lords, Lord Pannick and Lord Adonis, takes my proposal one stage further, and in a new subsection (12) demands much more specific types of advice as well as a written agreement for individuals being offered the opportunity of employee shares and specifies the nature of that advice in much more detail. Not only do I think that is more useful but I am sympathetic to it.
	Amendment 82B would then put the onus for paying for that advice on to the employer. I am sure that this is correct and only fair. If you are giving up your rights as an employee in return for shares that may, though probably may not, increase in value and will certainly be diluted out of sight in the future, that is a complex decision that needs specialist advice and careful consideration by the prospective employee shareholder.
	When we come to discuss clause stand part I will return to some of the principles of the clause in general, but I want to conclude on these amendments by saying that all the evidence that I have heard from both employers and employees, in the sector that Ministers say is the one most likely to take this up, is that it just will not be attractive. I hope that the clause will wither on the vine, but if it does not then we must have protection for the employees who are going to be faced with this sort of proposal.

Lord Vinson: My Lords, I declare an interest in that for many years I was chairman of the Industrial Co-partnership Association. I also happen to be fortunate enough to have floated a company on the stock exchange when we had 1,000 employees, and we gave 10% of the company to our employees.
	I am deeply committed to the concept of wider share ownership but I am concerned about Clause 27. I shall give the Committee an example of quite what ownership means to some people. One of the older women in our company came up to me about a month after we had floated it and said, "Guvnor, you just don't know what it means to me to feel I am part of this company. It has made my life". That just brought tears to my eyes. People want to belong, and in smaller businesses they can belong and feel that they are names, not numbers.
	However, the whole point of wider industrial shareholding is to try to create a sense of common purpose. I fear that the unnecessary obstacles and quid pro quos put into Clause 27 go in exactly the opposite direction; they negate trust rather than increase it. With great reluctance, therefore, I have to speak against the Government, who I am sure are right to encourage wider share ownership. If you wrap it up in complexity, cover it in advisers and make it all too difficult, it simply will not happen, but it is fundamentally the most attractive and important thing to create a wider capital-owning society in which everyone feels they have a stake.

Baroness Turner of Camden: My Lords, at Second Reading I opposed these provisions. In my view this is yet another attempt by Government to remove employment rights which have been hard fought for by previous generations. In my view, it is a backdoor means of introducing the Beecroft proposals which were recently condemned not only by trade unions but by many employers as well.
	The Government maintain that the new status of employee shareholder is voluntary. Really? Are these proposals voluntary in situations where there is already high unemployment, where people are desperate for any sort of employment? A number of the issues have simply not been thought about. What about mergers? Do employee shareholders take their shares with them or do they have to give them up? What happens to TUPE-the Transfer of Undertakings (Protection of Employment) Regulations-which gives protection to employees? According to an opinion provided by the Equality and Human Rights Commission, an employee shareholder is legally still a worker and therefore still has employment rights-hence the Government's insistence on the voluntary nature of this new status, so that the worker voluntary surrenders rights.
	Of course, while the employee shareholder may have a right to benefit from shares, he or she also shares the risks involved. For this reason, many people-including the movers of Amendments 82A and 82B, and even Amendment 92-have said that before entering this arrangement, the employer must have access to legal advice of an entirely independent kind. It has even been suggested that the employer should pay for this. These are, of course, modifications on a quite unacceptable set of proposals.
	I still oppose the whole arrangement. It is one of a series of arrangements in which the Government are seeking to weaken or remove employee rights. We have already discussed the Enterprise and Regulatory Reform Bill in this House, which has a section on employment which is designed to make it as difficult as possible for employees to access employment rights and to take cases to tribunals. It also includes provisions in relation to health and safety at work, making it more difficult for workers to claim.
	The LASPO Act, discussed before, also made it clear that legal aid would not be provided in employment cases. It is already becoming clear that the minimum wage is inadequate, and there is talk of a living wage instead. In April this year, cuts will begin to affect a whole range of people on benefits, particularly housing benefits. The Government claim, however, that much of this legislation is meant to assist small and medium-sized employers-SMEs. However, employers are already benefiting from low wages, which are in many cases subsidised by the taxpayer through the benefits system. Clause 27 is yet another attack by the Government on employment rights and on ordinary workers. It should be opposed for what it is.

Lord Martin of Springburn: My Lords, I support all those who have spoken, especially the noble Baroness, Lady Turner. She is right when she says that these rights were hard fought for. In my working life, I recall a time when people lost their job and went out of the door with a week's wages and, if they were lucky, maybe some holiday pay. It gave dignity to people who were very loyal to their company that, if they were unfortunate enough to lose their job after a decent period of time, they at least got something to tide them over, because redundancy payments are not all that big.
	This is an insult to the companies which already give shares to their workers. There is a famous heating company-it is not fair to mention its name-whose owner decided that, because he did not have any direct heirs, he would give the shares to his workers. He did not put any strings on that arrangement; he gave the shares to the workers.
	This is bad legislation. We are bringing in a situation where we are saying, "Give up your rights and we'll give you shares". We are giving a financial incentive which, at the end of the day, as the noble Baroness said, is not necessarily a financial incentive because shares go up and down.
	I remember being in Committee on the famous Tebbit Bill. The noble Lord, Lord Tebbit, is now a fellow Peer. He and many others argued that the trade union movement had been given too much in the way of rights by the previous Labour Government. One of the things they said was that you could not apply for unfair dismissal unless you were employed for a full, consecutive two years. Under the Labour Government, it was a year. The argument was that you had to show loyalty to the company that you were with.
	Under this arrangement, workers who are prepared to show loyalty are giving up their rights on the day that they walk in the door and sign them over for shares. They still have to be employed for two years before they can apply for redundancy, and that proves that they are loyal people. The noble Lord, Lord Tebbit, would recognise that. He said that we want loyalty. Employers are getting that loyalty, but the Government are now saying that they want a facility where people give away their rights.
	I can see a situation in places of employment where you will turn worker against worker because some will accept this deal but others will say, "No, I would rather keep my statutory rights". It could be that pressure will be put on them. I bring the Committee back to Sunday working. During the passage of the legislation on Sunday working it was stated that anyone who had deeply held religious beliefs would not have to work on Sunday. That held for a while, but when new employees came in they were told that if they wanted the job, they had to work on Sundays whether they had deeply held religious beliefs or not.
	The Bill states that employers will have to respect workers' right to say they do not want shares and that those workers will be entitled to their rights under legislation. But what the Government have not considered is the new employees. People coming in the door will be told: "You must accept the workers' shares, and if you don't like it then you don't get the job". This is bad legislation.

Baroness Afshar: My Lords, I have worked for a long time with minority groups who employ their women in a system that is very similar to what is proposed. They have an interest in the business, they are committed to the business, they have kinship ties, and they have absolutely no rights. They work right through the day, and they share the losses and the gains.
	In my long experience, the children of these minorities, who are some of the best educated children because the families use education, grow up and wish to use their education to get out of the informal sector into the formal sector. They wish for a different experience from that of their parents. They want to be workers with rights, entitlements and the possibility of progress. In fact, many of them would work in these new companies without realising that by doing so they were returning to where their parents were. That is not because they are not educated but because of the complexity of the contract. They are happy to have a contract. They sign it, which means it is formal and official. They do not have a lawyer at their side to warn them of every point. It would be a matter of great regret to lose these intelligent people, who, I think, are footloose and fancy free. They may well move on to other countries where they are better paid for having poor contracts. We are losing the confidence of our minorities and possibly the prospect of some very well-educated young people.

Lord Strasburger: My Lords, I declare an interest. Before I joined this House I was a serial entrepreneur. I have started many businesses from scratch. The most recent one employed 200 staff after being in business for four years. I am a big fan of giving employees a stake in the success of the business so that their goals are aligned with those of the founders. It never crossed my mind that my staff should need to forfeit their employment rights in exchange. Snatching these rights is hardly the best way to win their hearts and minds. Managers who feel they need to diminish the rights of their staff to get their full commitment to the success of the business are bad managers and will almost certainly fail. This idea is complete nonsense.

Lord Flight: My Lords, when these proposals were announced, I was somewhat lukewarm towards them, for some of the reasons that other noble Lords have spoken about today. However, as I thought about the proposals rather more, it seemed to me that there is some sense to them. They are not proposals for everybody. They are not for individuals who work for the public sector or for large companies; they are relevant to individuals who are by nature high risk-reward in their approach. They are willing to be high-risk takers to build up capital for themselves and their families. The proposals are, as has been articulated, for small and medium businesses, and are certainly not appropriate for larger businesses.
	The proposals at present are really rather simple and straightforward and may be capable of improvement but not, I hope, of too much embellishment or the whole point of the principle would be undermined. People have the option whether to participate. If you wish to be an employee entrepreneur, here is the chance to benefit with equity on an extremely tax-attractive basis, but you are going to be taking risks just like the entrepreneur himself. One of the problems with small-company share schemes, as I have experienced in my own career, is that they are very limited. Where options have to be used they end up being taxed at nearly 60% and are not particularly attractive. The carrot of tax-free capital gains is attractive.
	The subsequent amendment that I will address shortly suggests a template for and guidance on the new scheme. Particularly as it is new and untried, that is needed. The principle of requiring advice I can go along with to some extent, although requiring barristers seems perhaps to be jobs for the boys. The principle of the scheme seems pretty straightforward. It does not require anyone of huge intelligence to understand the quid pro quo.
	Moreover, some of the potential problems have already been addressed via amendments in the other place. There are measures intended to stop any form of coercion. Employees also retain the great majority of their employment rights. Partly paid issued shares cannot be used, so people would not be left with a liability if a company went bust. If shares are inappropriately valued, the deal returns employees to their normal employment status. I am not sure how far one should really go to spoon-feed the principles. If someone is not a natural risk taker, this is clearly not for them, and they should not look to accept a job with this sort of deal.
	I am a huge believer in employee participation. I built a business based on virtually all the employees having equity in that business. While the business was being built, we really could not afford to pay people what I would call full market rates, and because we needed the money to build the business there was a trade-off there. But those individuals had to pay capital gains tax on their eventual gains, and some had to pay income tax because option arrangements were used. In a sense, the risk-reward tilt of the balance was not ideal at that stage.
	If I were 40 years younger, or even still today, if I were offered the ability to participate in a young business that I felt could be a huge success, I would certainly opt for this scheme. I would look, bluntly, to my own potential contribution to the business as being my best assurance of employment, not to legal rights. The other side of the coin is that when entrepreneurs set up a business, they have to take a tremendous risk. People never think about that. Many of them have to put their home and family at risk. If the business fails, there is a charge on the house and they lose everything. There is a degree of fairness in the sort of risks that entrepreneurs take and the slightly higher degree of risk for employees who are bold enough to want to become employee shareholders.
	One concern is that, increasingly, larger businesses are being run by HR departments. An element of Beecroft is correct. Yes, it is a sound principle to protect people who need protection, but I very much hope there is a realisation that if this country is to recover and compete with more dynamic economies, there will not necessarily be as much scope for the protections and featherbedding that have been enjoyed in the good days of the recent past.
	I hope that the proposers of these amendments will reconsider them and wait to see what suggestions the Government come up with, at least to provide codes and arrangements that achieve some of their objectives but without having to use the complexities and expenses of the law, which are very costly for very small businesses.

Lord Morris of Handsworth: My Lords, the issues in this debate on Clause 27, and the other amendments, have not changed. I take the view that the objectives of the clause and the conditions attached to wider share ownership were wrong then and remain wrong. The issues that British industry faces today are not to do with wider share ownership. Of course, it is to be welcomed if we can provide greater security, commitment and skills; it is very much part of a process of commitment and evolution within the workplace.
	At Second Reading, I said that I was no stranger to the concept. I worked in my company for 18 years and was awarded employee preference shares. I welcomed them, and they caused no harm. But I have to tell noble Lords that they did not influence my loyalty, commitment or motivation in that company. I gave of my best because it was a decent company, with its terms and conditions as well as security. Everything that went with it could be described as a model experience. I did not even give the shares a thought. I could not find my share certificate when the time came to dispose of them. That is how little they meant to me. I was no exception in that regard among the more than 3,000 people employed in that company because the company culture was right and the company met the needs of the industry.
	We really ought to look at the deficiencies of Clause 27. It does not address training, productivity or investment, be it investment in people, community or the wider concept of society. I do not see too many words about skills in the clause and do not begin to understand how it could be deemed necessary to bring it forward to secure the loyalty and overall commitment that industries need. Indeed, it could be argued that Clause 27 will have a perverse effect on employee relationships within the workplace, because if the workplace is about anything it is about unity, working together and equity of treatment and approach. What we are doing here will possibly sow the seeds of a divided workforce operating in small units where some people are shareholders and some are not. The legislation does not provide equity of security because at the outset your legal rights have to be forfeited. I am old fashioned enough to think that workers' rights cannot be bartered for sale on the stock market because that brings nothing back into a company.
	I say to the Government that sooner or later we will need to address the wider concept of industrial partnership but from a totally different perspective. We are discussing a "buy today, sell tomorrow" concept. If your shares are tradable, do you have any loyalty once you have disposed of them? You certainly do not have any rights because you gave those up at the start point, but do you have any real security? I do not think so. Therefore, I believe that the points that were made at Second Reading and the points so ably made today by the noble Lord, Lord Pannick, in respect of the legality of the issues involved in the different statutes lead to the necessity to rethink this clause. The clause really needs to get back to considering what industry needs, what is required and what will increase productivity, not just a "buy today, sell tomorrow" culture.

Lord James of Blackheath: My Lords, it would be extremely helpful if the clause contained a clearer definition of "profit share" and "equity participation". That is where the confusion will arise and cause the greatest difficulty. Profit share is relatively clear, straightforward, simple and very motivating. I wholly agree with the noble Baroness who talked about that earlier. That is fine, but profit share does not carry with it any of the risks that go with equity. I disagree with the noble Lord; you do not just buy your shares today and sell them. If you are a locked-in minority, especially in a quoted vehicle, you are stuck, you have no way out, and you never will have.
	Further, and worse, I have seen this work to the total detriment of the shareholders. I had a company that had a number of ships-we were opening the North Sea oilfields-that were bought and each put into a separate company. It looked like a good, straightforward, long-term profit opportunity, so we had a lot of participation by Scandinavian banks, which would buy a ship and put it into a purpose-built company. The captain might be offered the opportunity of 20% of the equity in that company, meaning 20% of the ship he was going to sail. If that company did not get the contract work, did not make the money and could not service the debts of that bank, the banks in Scandinavia came at those shareholders and took their homes as a condition of their putting in the extra money.
	These hazards are not anticipated in what we have here. There are some fearful risks in inviting people to become locked-in minorities, especially in SMEs where you have nowhere to go if there is a problem. Profit sharing does not have any of those problems, so we should be going down the profit-share path, not the equity-participation route, especially where it is given free into unquoted vehicles.

Lord Adonis: My Lords, first, I congratulate the noble Lord, Lord Flight, on being the first speaker in more than 50 on the Bill so far to defend this shares-for-rights proposal. His reward will no doubt be substantial hereafter.
	I also welcome the noble Viscount the Minister to our debates on the Bill. The noble Baroness, Lady Hanham, is looking mightily relieved that she has an afternoon off. Her time will return only too soon. The noble Viscount has the thankless job of defending the indefensible-another practice that, if I may extend the analogy used by the noble Lord, Lord Pannick, goes back to the Book of Genesis, where Adam had to explain why he had misbehaved in the Garden of Eden. We are rather hoping to expel the entire Clause 27 from the Garden of Eden, but we are first debating some mitigating measures and inviting the noble Viscount to respond.
	We start with the issue of coercion. The noble Lord, Lord Flight, said that the issue of coercion had been dealt with, but I contend that it has not. One of the reasons why Clause 27 is fundamentally wrong and flawed is that, contrary to the Government's own statements and assurances, it is coercive in that it in effect requires individuals to accept jobs without fundamental employment rights. The coercion involved in these shares-for-rights jobs comes in two ways. First, individuals will in some cases have no option but to accept such jobs. We will come to that issue in respect of benefits claimants in the next group of amendments.
	Secondly, these shares-for-rights jobs are in all cases potentially exploitative, because there is no requirement for independent advice before an individual signs up. It is therefore likely that individuals, particularly the more vulnerable and low paid, will not be properly aware, or even aware at all as they will not be as informed as the noble Lord, Lord Flight, of the rights they are forgoing in return for shares worth as little as £2,000 at the time they are issued. As the noble Baroness, Lady Brinton, said, these shares could be worth even less or nothing at all if the employees want to sell them at a later stage.
	A whole succession of noble Lords, starting with the noble Lord, Lord Pannick, have made a compelling case for there to be protections, including independent advice before shares-for-rights contracts are entered into. The amendment in my name and that of the noble Lord, Lord Pannick, proposes that there should be legal advice on the rights forgone and financial advice on the valuation and prospects of the shares it is proposed to offer in lieu of employment rights. Without such advice, the scope for exploitation is considerable. Such advice should be paid for by the employer, and there should be an explicit agreement between employer-

Lord James of Blackheath: Will the noble Lord draw a distinction between the legal advice to be given in the potential sale of a listed company, where the majority shareholders have a separate set of interests and the minority shareholders-the working shareholders possibly have a very different set of interests? Are we to have two separate and parallel sets of lawyers to avoid a conflict of interest between those types of shareholders? That would seem necessary. How is it to be funded?

Lord Adonis: My Lords, we are talking about individual employees who are seeking to take jobs, which is a different situation from the one that the noble Lord has described. We are not talking about the takeover of companies, which is the issue he raised. However, the noble Lord is right to point out that two different sets of interests are involved. As the noble Lord, Lord Pannick, said, we have these rights purely because of an imbalance of power in the relationship between employers and potential employees. If the noble Lord is saying that we need two lots of lawyers on the job, I understand the point he is making but it makes the proposal even less workable and even more unaffordable.

Lord James of Blackheath: The noble Lord is correct; that is what I am saying-you need two sets of lawyers in any case.

Lord Adonis: The noble Lord therefore proposes a system that is even more complex and onerous than is envisaged. Such advice should be paid for by the employer, and there should be an explicit agreement between employer and employee stipulating the employment rights that are being foregone and the value of the shares being allotted.
	When similar amendments were debated in the Commons, the Minister, Michael Fallon, said that they would impose,
	"an unnecessary cost and burden to the employer".-[Official Report, Commons, Growth and Infrastructure Bill Committee, 6/12/12; col. 484.]
	However, this is not a new principle. As the noble Lord, Lord Pannick, said, it is, in fact, a principle accepted by previous Conservative Governments. The great noble Lord, Lord Tebbit, was Secretary of State when this principle was enshrined in law. Under the legislation of the previous Conservative Government, there are minimum independent legal advice requirements on the surrender of unfair dismissal rights in what are now called compromise agreements-a key element of which is a written agreement upon which the employee has received advice from an insured independent legal adviser or other specified and qualified person.
	The noble Lord, Lord Pannick, also quoted the advice and recommendations of the Equality and Human Rights Commission, which could not be clearer. Let me read the recommendations to the Committee. They state that,
	"the mere fact of a choice having to be made on which type of employment status to accept could indirectly discriminate against those less likely to be able to make a properly informed or truly 'voluntary' decision. This may include those whose first language is not English, those with learning disabilities, or young workers".
	The commission's recommendations continue:
	"In order for objective justification to be established, it is likely to be necessary for the individual to have a right to receive appropriate advice and for the employer to be required to draw this to his or her attention".
	We agree entirely with the Equality and Human Rights Commission's recommendation. It is now up to the noble Viscount to say why it is wrong.

Viscount Younger of Leckie: Noble Lords will not be surprised to know that I was expecting a somewhat lively debate on this general issue of shares for rights. I very much appreciate noble Lords' contributions. Before I turn to the amendments in the group-Amendments 81D, 82A, 82B, 91 and 92-I should take this opportunity to inform the House about the clause. I will have the chance to expand on this during a stand-part debate, but the House might like to understand why the Government are creating the new employment status and what it is aimed to achieve.
	The Government are creating a new form of employment contract that companies limited by shares can use. This new status will be known as "employee shareholder". The employee shareholder will be granted shares in the employing company or the parent company but will not have all the rights of an individual with employee status. The Government are taking this action to offer companies and people more choice, and are giving choice to companies on how they structure their workforce to ensure maximum growth and flexibility, more choice for people in the type of jobs that are on offer to them and new opportunities to benefit from growth and meet their long-term aspirations.
	This Government, from the outset, have committed to reforming employment laws, and are doing so through the employment law review. Establishing the employee shareholder status is different. With this change, the Government are creating a new type of employment relationship. It is an employment relationship where both the company and person share the risk and rewards for business more than any other employment type.
	I now want to address the amendments tabled by my noble friend Lady Brinton and the noble Lords, Lord Adonis and Lord Pannick. This clause is not about making a new employment status compulsory for all. It is about adding to the employment statuses that already exist. It sits alongside existing employment statuses such as employee and worker.
	Employment law does not stipulate that individuals should have legal or financial advice before accepting a job with the employment status of either employee or worker, or taking up share ownership possibilities. It would be anomalous to impose these requirements for the new employee shareholder status. Neither do we want to stipulate that employers must pay for legal advice. Noble Lords will appreciate that legal expenses can be high, which would be a burden both in administrative and cost terms, in particular for the type of fast-growing company to which this is most likely to appeal.
	There is nothing in the clause that prevents individuals from seeking independent advice. This is about creating a new voluntary employment status and not about creating additional burdens for employers.
	As for employment contracts, it is important to leave these to employers and individuals to negotiate, discuss, and agree to, although employees are entitled to receive a written statement of employment particulars within two months of the start of their employment. Government are committed to reducing burdens arising from regulation and therefore wish to keep administration requirements to a minimum.
	The status, as we have already said, will be most attractive to fast-growing businesses, which will spend time looking for and investing in the right people to help their business grow, and will be willing to give fully paid up shares to the right candidate. These employers will have to invest in employee shareholders by giving them shares, which is a cost to them. It is likely that they are exactly the type of employers who would then struggle to find the additional cost and time to fulfil the amendments my noble friends and the noble Lords are suggesting.

Lord Flight: Just before my noble friend passes over this matter, I would like to raise one issue that is not clear to me. When the grant of shares is given, is the value of them treated as taxable income? If so, I certainly think that it should not be part of the deal as something that is tax attractive.

Viscount Younger of Leckie: I thank my noble friend for that question. The shares are treated as taxable income, although they are shares, so there would be tax at whatever level payable on the shares received.
	I should now like to answer some questions that have arisen. The noble Lord, Lord Pannick, stated that there was no demand for this new status. I can understand his concern from other comments made this afternoon. This new employment status will not be appropriate for all companies or be taken up across the board. It simply adds to the options and flexibility available to companies and individuals in determining their employment relationships.
	My noble friend Lord Flight has eloquently mentioned this particular issue in his speech. The new status will probably appeal mainly to fast-growing and small start-up companies and individuals as this is the level where employment rights are seen to impact the most.
	I would like to address directly the points raised by my noble friend Lady Brinton to say clearly that this particular employment shareholder status will not suit the examples that she cited in or near the Cambridge area. My noble friend Lord Strasburger also cited some example and I suspect it would not suit-

Baroness Brinton: Does my noble friend accept that this is exactly the group of companies that Ministers in another place were citing were perfect for exactly this sort of scheme?

Viscount Younger of Leckie: Indeed, it may well be the case, but it is not my position to stipulate exactly which particular companies would be right for this particular scheme; only to say that we are offering this as an incentive and an opportunity for business to help the company grow. If it is not suitable for particular companies, that is absolutely fine-it is not suitable.
	My noble friend Lady Brinton also asked why we were removing the statutory right to request time to train. The Government recognise that training in the workplace is important and acknowledge the concerns raised. There is currently no reason to suggest that removal of the statutory right to request time to train, which at present is available only to employees of large organisations-that is, those with more than 250 people-would result in employee shareholders being unable to access training or request it if needed. Larger employers tend to have established appraisal and development processes. On that basis, we do not believe that this proposal will adversely affect future employee shareholders. Employee shareholders can still make non-statutory requests for time off to train.

Lord Adonis: Did I understand the Minister to say in response to the noble Lord, Lord Flight, that these shares, including the first £2,000-worth, would be taxable? That is quite an important change in the policy announced in the other place.

Viscount Younger of Leckie: Yes, indeed, I can confirm that the shares that are received are taxable, so tax would be payable in the first available pay-

Lord Adonis: Tax payable at the point of receipt?

Viscount Younger of Leckie: Yes, it would be in the month following receipt of the shares.

Lord Adonis: Is the noble Viscount aware that he has made quite a significant change in government policy in the past few moments?

Viscount Younger of Leckie: I shall come back to the noble Lord very quickly if what I have said is incorrect, but I am pretty certain that it is correct.

Baroness Brinton: My Lords, I apologise for intervening again but this point is absolutely critical to the Government's intended success of the clause, or otherwise-that is, a carrot needs to be available to the employee at the time of the share issue, as well as later when there might be some fruition in terms of the investment. This seems to remove the only carrot at the time of the initial employment.

Viscount Younger of Leckie: As promised, I will revert to the noble Lord, Lord Adonis, as quickly as possible to confirm what I said.

Lord James of Blackheath: Will the noble Viscount please also assure the Committee that there will be an absolute bar on companies lending individuals the money to pay that tax? They will be in enough trouble already.

Viscount Younger of Leckie: I would like to think that I could say yes to that. However, it is up to the company to decide, and it is something that I cannot stipulate or guarantee.
	I should like to address the question raised by the noble Lord, Lord Adonis. I can confirm that the shares are taxable, but the Chancellor is considering making the first £2,000 tax-free.

Lord Adonis: My Lords, with great respect to the noble Viscount, he is trying to say that the shares are and are not taxable. Which is it? Is the first £2,000-worth of shares taxable or not?

Viscount Younger of Leckie: I think that I have made the position very clear. The Chancellor is looking at this but I have said that it is taxable.

Lord Stoddart of Swindon: I have to say that the noble Viscount has not made the position clear to me. It may well be that everybody else is clear about it but, as I understand it, he is saying that the £2,000 will be taxable, and he appears to be saying that it will be taxable as income. If that is so, the value of the shares in real terms could very well be reduced by 40%. Is that right?

Viscount Younger of Leckie: First, it depends on whether the employee shareholders are 40% taxpayers, but I can confirm that tax is payable on the shares that are given.
	My noble friend Lady Brinton expressed concern surrounding the share dilution, particularly when small businesses have additional investment. Additional investment shows that a company has potential and this should benefit the shareholders in the long run. We envisage that it will. Minority shareholders already have some protection under company law, and employee shareholders would be able to make appropriate representations under these rules.
	I now turn to a question raised by the noble Baroness, Lady Turner, concerning TUPE. She asked whether TUPE will be affected by employee shareholders. Exactly how TUPE would apply would depend on the precise details of the transfer, but there is nothing in the employee shareholder clause as it stands that would require an interpretation incompatible with TUPE. It is important to realise that any employee transferred under TUPE cannot be forced by the transferee into becoming an employee shareholder. The employee will still have a right not to be unfairly dismissed or suffer a detriment as a result of refusing an employee shareholder contract. There is nothing to stop business arrangements being made in such a way as to provide that a person who is an employee shareholder in one company becomes an employee shareholder in another company. It is also possible to agree that the employee shareholder would no longer have employee shareholder status and become a full employee. I also want to clarify that if an employee has bought shares privately in a company, and he has transferred to that company under TUPE, he is not deemed then to have become an employee shareholder of the company by virtue of holding shares in that company. That is because the shares were not given to him as part of the employee agreement to become an employee shareholder.
	The noble Baroness, Lady Turner, also raised the issue of Beecroft. I think she said that this was Beecroft by the back door. I reiterate that it is certainly not. The new employee shareholder status is different from the no-fault dismissal proposal because individuals become shareholders of the company at the start of the employee relationship. That is an important benefit conferred by the employee shareholder status. Unlike no-fault dismissal, the employee shareholder status will be freely agreed between employers and individuals in contractual negotiations. Employers will also be free to offer improved contractual terms, such as contractual redundancy payments, as raised earlier, in an employee shareholder contract. After reviewing the evidence, the Government found no compelling reasons to implement the no-fault dismissal proposal.
	My noble friend Lord James of Blackheath was concerned that shareholders might be locked in and subsequently would have to pay the debts of the company. The shares must be fully paid up by the company. No financial liabilities are attached to the shares. No personal guarantee can be demanded from an employee shareholder as a condition of the particular status.

Lord James of Blackheath: Can the noble Viscount please explain what would happen in the event of a rescue rights issue?

Viscount Younger of Leckie: I will certainly have to come back to my noble friend with a full answer to that question.
	I shall conclude by agreeing in part with the noble Lord, Lord Pannick, on a particular point. There is indeed a large number of sources of quality legal and financial advice available. The Government do not need to stipulate where people should seek advice, nor would it be appropriate to oblige people to seek such advice when they may not need or want it. The best approach is to provide guidance, which we will do, to ensure that people enter into contracts with their eyes open. That is the approach that we are taking. With those reassurances I hope that the noble Lord will withdraw his amendment.

Lord Pannick: I am very grateful to the Minister and, indeed, to all noble Lords who contributed to this valuable and, as described by the Minister, lively debate. It confirmed, as many noble Lords suggested, that this is an ill thought out, divisive and unnecessary provision that ought to be put to sleep as soon as possible.
	The Minister suggested that Clause 27 simply creates a choice, and asked what was wrong with creating choice? The whole point of employment rights is that they are needed because the bargaining power of the employee is so limited that statutory protection is required. The noble Lord, Lord Flight, suggested that these proposals might be appropriate for some types of employee in some types of employment. There are two difficulties with that defence. First, Clause 27 is entirely general in its terms; it is not confined to particular types of employment and particular types of protection. Secondly, the employees and the employers for whom the noble Lord, Lord Flight, suggests Clause 27 might be appropriate-entrepreneurial employees in high-tech companies-are not operating in a context where the rights to protection against unfair dismissal and redundancy are of particular significance. It does not inspire a great deal of confidence in Clause 27 that the best point that can be made in its defence is that it will not be used very often.
	This amendment is about legal and financial advice, particularly legal advice. The noble Lord, Lord Flight, said that legal advice is not needed in this context because the legal implications are very clear. I have to say that they may be clear to the noble Lord, but I can assure him that the implications of signing away one's basic employment law rights, and what one will receive in return, will not be clear to the ordinary working man and woman who may be invited to sign away these essential protections.
	The Minister then said that there was nothing in Clause 27 that would prevent the employee seeking advice. As a judge said in the 19th century, it is rather like saying there is nothing to prevent the employee from staying overnight at the Ritz hotel. Statutory protection is required to ensure that in reality, advice is made available for those who will not otherwise obtain it. The Minister did not address this. I cannot understand why legal advice is-rightly-required by Section 288 of the Trade Union Act in the context of a compromise agreement, but is not required under this clause when the employee gives up his or her employment rights generally.
	I hope the Government will listen to the noble Baronesses, Lady Brinton, Lady Turner of Camden and Lady Afshar, and to the noble Lords, Lord Vincent, Lord Martin, Lord Strasburger, Lord Morris of Handsworth and Lord James of Blackheath, all of whom speak from their different perspectives with an enormous range of experience. The Minister and noble Lords will know that there are many other noble Lords who are not here today who are equally concerned by Clause 27. I hope that the Government will listen and do what must be blindingly obvious that they ought to do, which is to withdraw Clause 27 so that we do not need to spend-I will not say "waste", because it is not a waste of time-any more time on this on Report. In the mean time, I beg leave to withdraw the amendment.
	Amendment 81D withdrawn.
	Amendment 82
	 Moved by Lord Adonis
	82: Clause 27, page 34, line 15, at end insert-
	"( ) Any individual who declines to enter into an agreement under section 27 of the Growth and Infrastructure Act 2013 shall not suffer any consequential reduction or withdrawal of any state benefits to which they are entitled to by virtue of their current employment status."

Lord Adonis: My Lords, the purpose of Amendment 82 is the same as that of the amendment in the name of the noble Lord, Lord Tope, and the noble Baroness, Lady Brinton. I hope that we can unite across the House on the simple and fundamental proposition that shares-for-rights contracts should be voluntary, and that individuals on benefits should not be forced to accept them for fear of losing their benefits if they do not.
	Before getting to the substance of the amendment, I will raise with deep concern a point of procedure fundamental to the issue of what benefit claimants will or will not be required to do, which is the guidance given to DWP decision-makers where appeals are made against the docking of benefits in cases where a claimant has failed to accept an appropriate job or attend an interview. The Government have said repeatedly through the passage of this Bill through the other place and the earlier stages of our debates in this House that they will amend the guidance so that it is fair. This revised guidance is vital to understanding what will or may happen in practice. I have repeatedly asked that noble Lords see the revised guidance or at the very least a draft of it before we consider this clause. We cannot properly consider it without the revised guidance because the issues at stake are so fundamental. For example, will carers be able to decline to take shares-for-rights jobs, or to attend interviews for them, because they may want to request flexible working? Will a youngster with few or no qualifications be able to decline a shares-for-rights job or an interview for one, since under these contracts they will not even have the right to request to undertake study or training?
	I wrote to the noble Baroness, Lady Hanham, about the guidance on 9 January. By the time the Committee started I had not even had the courtesy of a reply. I raised this issue on the first day in Committee and the noble Baroness apologised for the absence of a reply-she did so very graciously-and, when I asked whether we would have the guidance by today, she said that she would seek to make sure that we did. We still have not got it. Instead, I have since had a letter from the noble Viscount which is wholly unsatisfactory. He wrote:
	"Where necessary, revisions will be made to the guidance. It is important that the guidance is clear and fit for purpose-
	it is, indeed, important; it is absolutely vital that it is clear and fit for purpose-
	"and this task is ongoing. I will share it with the House when it has been drafted but undertake to keep you informed of progress".
	However, we need the guidance today. I took the noble Baroness to be undertaking that she would at least seek to ensure that we had it today. In view of the fact that we have not had it, I now take the noble Viscount's letter to me to be intended to resile from the commitment to give us the guidance before we debate this clause.
	When are we going to see the guidance? Do the Government really intend that we should debate this clause without seeing it? The noble Viscount owes the House an explanation of what is going on and, before I proceed with my speech, I invite him to give us one so that we know the basis on which we are intended to proceed in debating this clause. Is the noble Viscount not intending to explain to us why we have not had the DWP guidance?

Viscount Younger of Leckie: I will be speaking at the usual moment. I would like to hear the speeches of other noble Lords first.

Lord Adonis: My Lords, I note that the noble Viscount is not even defending the fact that the guidance was not sent to us before this debate started. The first issue he needs to address is why we have not had the guidance before us in Committee even though we were given assurances that the Government would seek to get it to us; and we need to know precisely when the guidance will be forthcoming. I give him notice that if we do not have that guidance by Report there will be significant arguments about the way in which the Government have treated the House. I have been on that side of the Dispatch Box and I regard it as wholly unsatisfactory that we should be expected to debate a fundamental change in the way benefits claimants are treated without knowing what it will mean in practice.

Viscount Younger of Leckie: The noble Lord makes a very good point. I stick by the words in my letter that further guidance will be forthcoming. We have some guidance already but we are working hard to improve and expand it. I will come back to the noble Lord as soon as I can to explain when it will be available.

Lord Adonis: My Lords, I am grateful to the noble Viscount, but can he tell us whether that will be before Report, when we will debate and, I suspect, vote on the substance of the matter before us?

Viscount Younger of Leckie: I will obviously need to return to the noble Lord with a clear answer on that. Right now I cannot give him that answer, much as I would like to.

Lord Adonis: My Lords, the House needs to be aware of the situation that we are in at the moment. The defence that the Government make in respect of the proposal that benefits claimants will not be treated unfairly is that the DWP guidance will be redrafted. That is what the Minister, Michael Fallon, said in the other place and what the noble Baroness, Lady Hanham, said at earlier stages of our debate. We are now being told that the Government are not even prepared to undertake to allow your Lordships to see that guidance before we debate amendments which go to the heart of whether or not claimants will be required to take jobs.

Viscount Younger of Leckie: To be fair, I did not precisely say that. I said that I would get back to the noble Lord as soon as possible: I did not say that I would not get the guidance to him before Report. I stick by what I said, both in my letter emphasising that the guidance notes are extremely important and are being worked on at the moment, and, secondly, that I will come back to him as soon as possible-possibly even this afternoon-to give him a time for when the guidance notes will be available. I hope that it will be before Report.

Lord Adonis: My Lords, with each intervention the noble Viscount is more forthcoming. Now it is possibly later this afternoon. I know the Box is working hard and I hope that "possibly" later this afternoon becomes "definitely" later this afternoon.

Viscount Younger of Leckie: That is not a guarantee. I am saying that I am hopeful that the information will be available this afternoon.

Lord Adonis: My Lords, I spoke too soon. The noble Viscount has now moved back again and now we are not even at "possibly" this afternoon. However, I think he has got the message.
	The provision before us is completely contradictory and wholly indefensible. On the one hand the Government say-the noble Viscount said it again this afternoon-that this is about creating a new voluntary employment status which, therefore, potential employees have the right to choose. When the Bill was first before the House of Commons, Michael Fallon said:
	"No one wants to see employees pressurised into making a choice that may not be in their own best interests".-[Official Report, Commons, Growth and Infrastructure Bill Committee, 13/11/12; col. 9.]
	He later added, for good measure:
	"With regard to the new status being voluntary ... people will choose to apply for and accept employee owner contracts".-[Official Report, Commons, Growth and Infrastructure Bill Committee, 6/12/12; col. 497.]
	This principle, however, is then flatly contradicted by not allowing benefit claimants to make such a choice. On the contrary, if benefit claimants decline to apply for or accept shares-for-rights jobs, they stand to lose their benefits or have them docked. This is a fundamental point that goes to the heart of this debate. Michael Fallon was explicit about this in the House of Commons. He said:
	"The Government believe that jobseeker's allowance claimants must actively seek and be available for work ... it is right that employee-shareholder jobs should be as much a part of that consideration as any other".-[Official Report, Commons, 17.12.12; col. 649.]
	He went on to say that in cases where there is the offer of a job without employment rights-an employee-shareholder job-the unemployed person should "normally accept the offer". Those were his words.
	It is simply impossible to square that statement with the Government's commitment that acceptance of jobs on such contracts would be voluntary. It is clear that benefit claimants will be pressurised into accepting contracts that may be against their own best interests, unless the guidance with which the noble Viscount is unable to provide the House makes it clear that that is not the case. This amendment and that of the noble Baroness, Lady Brinton, will bring the Bill into line with the Government's own statements that accepting shares-for-rights jobs should be voluntary and not compulsory. I beg to move.

Baroness Brinton: My Lords, these two amendments are trying to achieve the same objective. I commend the noble Lord, Lord Adonis, on the wording of Amendment 82. My Amendment 90 echoes those sentiments. We have already discussed, in the previous group, the complex decision required of an individual being asked to become an employee-shareholder, who must take account of current employment rights versus the slim chance of future capital gains. However, there is a further and even more worrying aspect for one particular group of individuals: those who are currently unemployed and in receipt of jobseeker's allowance.
	What will happen to those offered a position in a company on the condition that they become an employee-shareholder and give up some of their rights? I am aware of people who find themselves being made redundant, through no fault of their own, not once but twice, or even more frequently. I am reminded of a friend in Luton who, following the closure of Vauxhall, moved from one company to another in the supply chain and was made redundant four times in the short space of a year. For people with that sort of history, the idea of giving up the right to future redundancy pay will be horrifying and would make the job extremely unattractive. This is not a run-of-the-mill job offer and I would be extremely concerned if an individual turned down a job and share ownership opportunity, and then discovered that his or her JSA was to be cut.
	The Minister in another place said:
	"The Government believe that jobseeker's allowance claimants must actively seek and be available for work ... and it is right that employee-shareholder jobs should be as much a part of that consideration as any other. If a claimant applies for an employee-shareholder job and is offered a position, they should normally accept the offer".-[Official Report, Commons, 17/12./12; col. 649.]
	It is this quote from the Minister that underlies the concern that the noble Lord, Lord Adonis, has laid out in some detail. I echo that because we have to see the guidance and information to make it exactly clear where the boundaries lie. I will not go back through the timescale of this, but it is essential that all sides of the House-all sides of the House have concerns about this clause-have time to consider the very serious implications for jobseeker's allowance for people who are sent off for that type of post.
	In addition, some people may send off hundreds of job applications but receive only one reply; some may get one interview; some may even get one offer. A job offer for shares-for-rights is a job: do the Government seriously think that someone will turn it down after months of searching? Many people cannot pick and choose jobs, even if they are worried about the reduction in rights, especially in the current climate, with many businesses folding. I cite Paul Callaghan from the legal fund Taylor Wessing, who suggests that shares-for-rights contracts will be optional to the extent that eating and drinking are optional.
	The amendment would write into the Bill a statement that makes it absolutely clear that the Department for Work and Pensions and Jobcentre Plus will not penalise an individual who makes the difficult choice to turn down a job. Should they accept it, they must have access to the same legal and financial opinion that we discussed under the previous group of amendments. That needs to be written into the Bill to ensure that protection and to provide Jobcentre Plus with clear and unequivocal direction.

Lord Pannick: My Lords, I share the concerns expressed by the noble Lord, Lord Adonis, and the noble Baroness, Lady Brinton, about the absence of the guidance that the Government are eventually to publish. The whole point of Committee on a Bill is that we can debate in detail the implications of the Government's proposals. By not publishing the guidance at this stage, the Government are preventing the Committee discussing the essential detail of their proposals. For my part, I do not find it satisfactory, even if the noble Viscount produces answers this afternoon. It should have been done in time for noble Lords to debate the matter today.
	In the absence of any guidance, we can proceed only on the basis that Clause 27 does not at all protect the prospective employee from being denied welfare benefits if he or she refuses to take up a job offer which involves the absence of employment rights. Even if there were adequate guidance, I share the view of the noble Baroness, Lady Brinton, that guidance is in principle inadequate. The Bill must state clearly the legal position in order to protect the prospective employee.
	Clause 27 is bad enough in its implications for employees, as we explained in a previous debate. It is even worse for the prospective employee. Under Clause 27, the employer can refuse to offer employment to applicants who decline to enter into one of these agreements giving up statutory employment rights. The irony is that the worse the job market, the more willing prospective employees will inevitably be to take the job, even if employment rights are lost. However, the poorer the job market, the greater the employee's need for the statutory protection against unfair dismissal and redundancy that the employee will be giving up. It is a vicious circle indeed.
	Amendment 82 and the amendment of the noble Baroness, Lady Brinton, each address a particular vice of Clause 27 in that respect. The vice is clear. It is that the prospective employee who wishes to maintain his or her statutory employment rights-during the previous debate, the noble Viscount emphasised that this is a matter of choice-and refuses to be bought off, is at risk of losing welfare benefits. That is indefensible for a simple reason. Clause 27 can only be based on a theory of equal bargaining power. It is a wholly unrealistic theory, but that is the theory. That is the fig leaf which shelters the substance of Clause 27. Even the fig leaf-the theory of equal bargaining power-is removed by the fact that the prospective employee's bargaining power is wholly removed if he or she is going to lose welfare benefits if he or she does not agree to take the job in the absence of the statutory protection of employment rights. Therefore, the absence of protection against losing welfare benefits for the job applicant inevitably means that, in practice, Clause 27 does not simply provide for a choice, it imposes an obligation.

Viscount Younger of Leckie: My Lords, Amendments 82 and 90 seek to add protections for jobseekers, should they refuse to apply for a job or accept a job offer that is on an employee shareholder contract. I understand the concerns that my noble friend Lady Brinton and the noble Lords, Lord Adonis and Lord Pannick, have expressed here and at Second Reading, that jobseekers could be coerced into accepting the new employment status and that jobseekers could lose their benefits.
	Jobs that will be offered on an employee shareholder basis will not be better or worse than any other job offered on an employee or worker basis. These jobs are as good as any other and should not be treated differently. It follows that the Government do not believe that a blanket ban on mandation is the right way forward. The different terms and conditions on offer for different jobs do not in themselves make it acceptable for a jobseeker to turn a job down. They are still good jobs.
	There are circumstances where a job offered under the employee shareholder scheme would not be suitable for an individual because of their particular circumstances or perhaps because of the particular terms and conditions on offer. Please note that the following is a non-exhaustive list, as all reasons cannot be captured and are dependent on the individual case, but I will list a few circumstances where a job might not be suitable for an individual: if a claimant is not capable of doing the job through a lack of suitable qualifications or experience; if a claimant is not physically capable of doing the job due to a physical or mental impairment; if a claimant has an agreed pattern of caring that is not compatible with the job; if a claimant is unable to get to the place of work by their normal mode of transport in time to start work; or if the expenses incurred by working would be an unreasonably excessive proportion of a claimant's pay. I believe that the noble Lord, Lord Adonis, brought up the issue of carers. If a claimant is a carer or is doing voluntary work they will have good reason for refusal or failure if the job requires them to start within less than one week. If a claimant has caring responsibilities for a child and is permitted to take up employment and been given 28 days' notice, they will have good reason for refusal or failure if the job requires them to start within 28 days. I could go on.
	The Government believe that there are already strong safeguards in place that ensure that a benefit claimant will not be forced into an unsuitable role. The sanction will only be applied if a claimant refuses to apply for or accept an offer of employment, including for an employee shareholder's position, after that claimant has been mandated to apply for a job by a jobcentre adviser. The decision whether to mandate claimants will be considered on a case-by-case basis by jobcentre advisers. Advisers will seek to ensure that the job is suitable for the claimant; for example, that it fits within the hours a claimant is available, taking into account any caring responsibilities, as mentioned earlier, in particular for young children.
	There is now guidance for advisers that is publicly available-and I will revert on this issue in a moment. We will supplement that guidance to cover any particular issues that may arise with employee shareholder jobs. I am able to update the Committee on the guidance. First, the guidance document is 3,000 pages long, so it is not a light piece of work. The noble Lord, Lord Adonis, is aware that I have already written to him on the issue of the guidance and he has cited parts of my letter. The guidance is for decision-makers and we have made it clear that the Government are reviewing the existing guidance to ascertain where it needs revisions. This must be done thoroughly and cannot be rushed, and I hope that the noble Lord will understand, despite the fact that it is not ready today, that this will take time, given the size of the document and the important decisions that need to be taken.

Baroness Brinton: Does the Minister accept that even if the Government say that it is likely that very few companies will be offering this type of employee share ownership, having a couple of points of guidance buried in 3,000 pages, or even 300, would mean that the average member of staff at a Jobcentre Plus would probably be unlikely to find the relevant information straight away? Does this not argue for the need to put this very special interest in the Bill?

Viscount Younger of Leckie: I would like to pick up only one of the points made by my noble friend. It is important, and I am sure that the officials are working hard on this, to ensure that the guidance that is offered is simple, and that there is a way that those involved who need to go to the guidance can do so quickly and effectively, despite the fact that it is 3,000 pages long.

Lord Pannick: Does the Minister agree that the simplest way for the guidance to address the matter would be for it to state in one sentence that it was reasonable for the prospective employee to refuse to accept a job because he or she did not wish to give up statutory employment protection rights? Is that what the guidance is going to say or is it not?

Viscount Younger of Leckie: I have not seen the guidance but I do not believe that it will say that.
	There are two further safeguards for jobseeker allowance claimants. Should a claimant refuse to apply for a job after mandation, a sanction will be imposed only if the claimant does not have good reason. A decision-maker within DWP will be responsible for making that determination. In reaching a determination, they will take into account the claimant's circumstances, the specific job and the terms and conditions on offer. Again, the Government will supplement the DWP decision-makers' guidance around any particular issues with the employee shareholder scheme that need to be considered.

Lord Adonis: Several times the Minister has said that the guidance would be updated with regard to any particular issues that arise from employee shareholder contracts. The particular issue that arises is precisely the issue raised by the noble Lord, Lord Pannick, which is that these rights are being withdrawn. If that is not the issue that arises, could the Minister tell the Committee what the issue is that arises which the Government are going to seek to address in the revised guidance?

Viscount Younger of Leckie: As I explained earlier, I am not in a position to give the Committee that information just at the moment. The issues will be outlined when the guidance is available. That is the only answer that I can give at this stage.

Lord Adonis: My Lords, the Minister has come to the Committee to tell us that he cannot begin to tell us the basis on which the guidance is going to be revised, which is his own defence in response to the arguments that the guidance itself will not be reasonable in the circumstances.

Viscount Younger of Leckie: I can only reply to the noble Lord that I am not in a position to explain the guidance because I have not seen it because it is being revised. That is the only answer that I can give at the moment.

Lord Pannick: I am grateful to the Minister for his patience in giving way. Will he deal with this point? If the guidance does not make it clear that the prospective employee is entitled to refuse a job offer because that offer involves sacrificing employment protection rights, the prospective employee does not have a choice. The defence that the Minister has put forward to Clause 27 is therefore simply inapplicable.

Viscount Younger of Leckie: On that particular point, it is important again to emphasise that each case involving an employee shareholder or a would-be employee shareholder will be looked at on a case-by-case basis. I hope that I have set out the process by which that will be undertaken by the jobcentre in negotiation and discussion with the potential employee shareholder. That is where we are at the moment. However, the guidance-which, I repeat, is coming-will go much further towards setting out the details and indeed the guidance for that process to work.
	The Government do not believe that the right way of providing the protection sought by the noble Baroness, Lady Brinton, and the noble Lords, Lord Adonis and Lord Pannick, is through amending this clause. As I mentioned earlier, the jobseeker's allowance system works on a case-by-case basis, with all decisions made on the merit of the case. The system is sufficiently flexible and robust, and jobseeker allowance decision-makers, with the support and guidance which we have committed to providing, will be able to understand the new employment status. With these reassurances, I hope that the noble Baroness, Lady Brinton, and the noble Lords, Lord Adonis and Lord Pannick, will not press their amendments.

Baroness Warnock: I wish to raise one question. How can a case-by-case examination of a claimant's refusal determine whether or not it is reasonable for an employee to be asked to give up his employment rights? This is nothing to do with a case-by-case basis, but an absolutely universal principle that would apply to everybody. If a would-be employee decides that he does not want to give up his rights, this is nothing to do with his particular case, but a general principle. Can the noble Viscount respond?

Viscount Younger of Leckie: I can only re-emphasise that when a case is taken on a case-by-case basis, this means that, if an individual is seeking a job and an employee shareholder position comes up, the Jobcentre Plus and the officials within the system will be looking at the individual's case. It is their job to determine the way forward in relation to the employee shareholder position that has arisen.

Lord Adonis: My Lords, the noble Viscount ended by saying that he hoped that I would withdraw the amendment in light of the reassurances that he had given. With great respect to the noble Viscount, he gave no reassurances whatever. Though I am not intending to press the matter today, the Committee will have to draw its own conclusions from the total absence of reassurance which the Government have provided so far. Not only have they not provided any reassurance, but they have not even given the Committee the basic information that we need to be able to make a judgment as to whether there is any validity in the statements that the Government have made to the effect that issues relating to the new employee shareholder status will be taken account of by DWP decision-makers.
	The noble Viscount has a disarming manner, and we commiserate with him for having to defend this proposal to the Committee-I would not wish to have to do so myself. However, when he says that we need to be sympathetic to the Government's position because this guidance is 3,000 pages long, I feel bound to point out that it is the Government who are seeking to change the law; it is not Members of your Lordships' House who are seeking to do so. The fact that the guidance is 3,000 pages long is not a defence for the Government not having prepared for changes which they are proposing to inflict on the country and declaring them to Parliament before we change the law. They say that changing 3,000 pages of guidance is a laborious job. I am sure that it is: I spent a good part of this morning trying to read the guidance and to make sense of it. Goodness, even legal eminences of the height of the noble Lord, Lord Pannick, would struggle with the complexity of the guidance which the DWP issues. If the Government are saying that they need more time, your Lordships would be very happy to give it to them if they wish to withdraw Clause 27 from the Bill and then bring it back when they have got their guidance in order so that we can then look at it with the clause to which it refers. There would be a generally warm reception to such a proposal from the noble Viscount.

Viscount Younger of Leckie: I just want to re-emphasise what I was trying to say about the document being 3,000 words long. I wanted to reiterate that this is no small task. One may well say, "You should've done it before Committee stage today and certainly before Report", but as the noble Lord knows, I cannot at the moment give a guarantee that it will be ready by Report. I simply wanted to state that this is a major document, a lot of detailed work is going on, and it will come.

Baroness Brinton: My Lords, I apologise for intervening on an intervention, but I just wanted clarification on this. The noble Viscount just said that the document was 3,000 words long, but I understood that we had been told earlier that it was 3,000 pages. There is some difference.

Viscount Younger of Leckie: I stand corrected-it is indeed 3,000 pages long.

Lord Adonis: My Lords, I repeat: it is the Government's responsibility to prepare the changes to the law and the guidance that they wish to make and to present them to the House before we change the law. The fundamental point is the one that the noble Lord, Lord Pannick, made-the difference in respect of these contracts is that employment rights are being withdrawn. The fundamental question, on which we need to see the guidance, is whether the withdrawal of these rights is itself a reason why unemployed people are permitted to decline to attend interviews or accept jobs. If it is not a reason then nothing has changed. This clause therefore flatly contradicts the assurances that have been given to Parliament that the new employee shareholder status is voluntary. I think that that is a very significant point which your Lordships will wish to take into account when we get to Report. I beg leave to withdraw the amendment.
	Amendment 82 withdrawn.
	Amendments 82A and 82B not moved.
	Amendment 83
	 Moved by Lord Adonis
	83: Clause 27, page 34, leave out lines 17 and 18

Lord Adonis: My Lords, I shall speak very briefly at the beginning of this debate because I want to comment on the noble Viscount's contribution. In the amendments in my name in the group, I simply specify all the rights that it is proposed should be withdrawn through the new employee shareholder status so that the Government will have an opportunity to defend their decision to withdraw them in each case and also to provide a longer notice period for early return from maternity and adoption leave. As the noble Viscount knows, we are opposed to each of the withdrawals of rights in Clause 27. The Government have not had the opportunity before your Lordships to explain their justification for the withdrawal of each of these rights. By putting these amendments down, I am giving the Government the opportunity to do so. I beg to move.

Lord Strasburger: My Lords, when I spoke to the first group of amendments I declared my interests as an entrepreneur. I forgot also to declare that in a former life I used to play cricket with Mr Adrian Beecroft, who is a very charming man and a very fine opening bat and cover fielder. However, to my knowledge he has no personal experience of starting or running a business. It strikes me that the authors of this clause have about the same amount of experience as Mr Beecroft in that area but are probably not as good batsmen.
	I have two specific questions to address to the Minister. First, which of the rights that this clause requires employees to forfeit is going to enhance their business's chances of success? Secondly, which of those forfeited rights do the Government think will improve the motivation and commitment of these second-class employees?

Lord Deben: First, I apologise for the fact that I have been abroad and therefore not able to follow that part of the Bill that has gone through since I last spent time on it.
	On these amendments, I also declare an interest as the founder of a successful small business and as having worked in other successful small businesses. I have to say to my noble friend that I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life. One of the problems with government is that not many people who run businesses are in it. I can genuinely say that in 16 years as a Minister, I was one of the few people who had run a big business. Since ceasing to be a Minister, I have run a number of small businesses which are happily getting larger. That is the right way round.
	I hope that the Government will take this opportunity to explain in detail why these changes, which are now open to businesses, will be of help. I have not found any businesses that thought that they would be of help. Having explained that, perhaps my noble friend would be kind enough to explain why, if the changes are good in these circumstances, they are not done for everybody. If there really is a huge advantage that would make lots more new jobs, perhaps the proposal is rather limited. I do not think the Government think that, otherwise they would not have limited it in this way.
	My problem-and this is why these are very useful amendments-is that difficulties can arise because some employment law is complex. Surely the answer is to deal with employment law as whole, try to make it simpler, remove the anomalies and face up to some of the real difficulties. I speak as someone who, in a relatively small business, had five people on maternity leave at the same time. I do not think that it was the fault of anybody in the business that that happened, but it had an impact. It is very hard indeed for a small business to handle. However, if I were setting up my business again, I certainly would not do it on this basis. I would not take on anybody without proper protection. I have always found it better to be more generous than absolutely necessary by law in the provision one makes. I want a business in which people feel they will have a real say and will play a real part.
	I suppose this is a plea, really; I do not understand the connection. I have thought hard about it but I do not see it. Unless the Government can explain the connection-and the amendments in this group enable the connection to be made-I do not know what this proposal is doing in this Bill. I do not know where it comes from and I do not see the need for it. For me, this is the most mystifying moment of a pretty mystifying Bill. This particular moment is more mystifying than others.
	I say that as somebody who is entrepreneurial, works hard, believes in capitalism and deeply disagrees with some of the words in the other parallel Bill where I have had to deal with the terribly old fashioned trades union approaches that sounded as if they were coming from 1945-

Baroness Turner of Camden: Old fashioned?

Lord Deben: The noble Baroness, Lady Turner, speaks from her seat, but she has put forward some opinions that I have not heard since 1945. I am not on that side but I still do not see this. I hope that the Government will help those of us who are naturally on their side to get out of this miasma-this difficulty of understanding the connection of the two halves. I have great sympathy with the question asked earlier by the noble Baroness, Lady Warnock. What is the connection and how will it improve things, one by one? I am very ready to be converted but at the moment I am finding it rather difficult.

Lord Pannick: The noble Lord, Lord Deben, posed a series of questions about the benefits of Clause 27. Perhaps I may add to the burdens on the Minister, who is playing a very straight bat-he would be a credit to the cricket team of the noble Lord, Lord Strasburger. I will put these questions to the Minister in the hope that he can explain whether the Government have taken account of two very troubling legal consequences that will follow from the current contents of Clause 27 and which are relevant to the amendments in my name and that of the noble Lord, Lord Adonis.
	First, some of the rights that the employee or prospective employee is being invited to sell are concerned with issues that are particularly sensitive in anti-discrimination law. There is the right to request flexible working, which is obviously of particular importance to working mothers-as is the eight-week notice period that would be imposed for the return to work after maternity leave. These are very sensitive matters. It is inevitable that employers who seek to rely on an agreement which purports to override rights in this context will face legal challenges under EU law, the expense of which will far exceed the amounts that they would pay to employees for giving up those rights. Have the Government taken that into account in deciding on the merits or otherwise of Clause 27?
	I would be grateful if the Minister would comment also on a second legal implication. If the law allows for the sale of unfair dismissal and redundancy rights, it is inevitable that aggrieved employees, when they are dismissed or made redundant at some stage in future, will not go quietly. Having sold their unfair dismissal and redundancy rights, they will formulate their grievances by reference to whatever legal avenue has not been sold. Nothing in Clause 27 affects-and because of EU law nothing in Clause 27 could affect-their rights of protection under anti-discrimination law. So instead of claiming unfair dismissal, or seeking compensation for redundancy, the aggrieved employee will contend that the dismissal or redundancy was based on a prohibited ground. Therefore, my second question to the Minister is whether the Government have really taken into account that any employer that enters into one of these agreements-and it seems highly unlikely that there will be many of them-will not be protecting themselves against the litigation that will result when an employee is dismissed or made redundant in future.

Baroness Brinton: Clause 27 requires employees to give up a range of rights. Many of these rights are ones that the Beecroft report recommended should be removed from employees more generally. The Secretary of State, Vince Cable, hit out at Beecroft's unfair proposals. He said:
	"One of Mr Beecroft's recommendations was a suggestion to bring in no-fault dismissal. In my daily conversations with businesses, this has very rarely been raised with me as a barrier to growth. Businesses are much more concerned about access to finance or weak demand than they are about this issue".
	Given that the clause is in the Growth and Infrastructure Bill and that the Secretary of State does not believe that giving up the right to claim unfair dismissal is a barrier to growth, why should we ask workers to give it up under this new status? In fact, Mr Cable went even further and stated that it would be counterproductive. He said:
	"At a time when workers are proving to be flexible in difficult economic conditions it would almost certainly be counterproductive to increase fear of dismissal".
	I never thought that I would support Mr Beecroft, but he recommended a compensated no-fault dismissal. The Government are going one step further and do not even provide compensation for no-fault dismissal under the employee shareholder status. Given how controversial Mr Beecroft's proposals were in the first place, and the Secretary of State's protest, does this not give us further reason for the removal of subsection (2)(c) and (d)? Beecroft also recommended the removal of the right to request flexible working-another of his recommendations that the Government are trying, perhaps, to sneak in by the back door through this status for certain employees. However, I have to say that this directly contradicts the coalition agreement and the mid-term review, which states that the Government will extend,
	"the right to flexible working to all employees".
	How can the Government fulfil that pledge when they will be removing the right from employee shareholders?

Viscount Younger of Leckie: My Lords, Clause 27 is about providing further choice to the range of employment statuses that employers can consider and choose. I want to take this opportunity to explain to the House the difference between "employee shareholder", "employee" and "worker". This will help us understand the context of the noble Lords' amendments.
	People and companies already have a choice in how they wish to work and how they structure their workforce. The choice is usually between hiring someone as a worker, an employee or on a self-employed basis. The difference between these employment statuses is the level of obligation and mutuality to provide and carry out work, and the rights associated with the statuses. I hope that the following explanation goes a little way to answering some questions that my noble friend Lord Deben raised.
	Workers have limited rights such as the right to be paid the national minimum wage, protections against unlawful deductions from their pay, paid annual leave and rest breaks, and protection against discrimination, which includes on the ground that they work part time. Employees who meet the relevant conditions have the following additional rights: a general right not to be unfairly dismissed after two years working with the same employer; automatically unfair dismissal rights; statutory redundancy pay; statutory minimum notice period; statutory collective redundancy notice period; TUPE, which was mentioned earlier by the noble Baroness, Lady Turner; the statutory right to request flexible working; and, finally, if they work in a large business of more than 250 employees, they have the statutory right to request training.
	The self-employed have limited employment rights linked to discrimination and health and safety. The new employee shareholders will have more rights than someone taken on as a worker, but not all those of an employee. They will not have: first, the right to unfair dismissal except for automatically unfair reasons or on discriminatory grounds; secondly, the statutory right to request flexible working or certain statutory rights to request training; and, thirdly, statutory redundancy pay.
	I turn to employee shareholders wishing to return to work earlier than originally planned from maternity, additional paternity or adoption leave. When returning early from these types of leave, employee shareholders will need to give 16 weeks' notice, compared to six weeks for employees returning from additional paternity leave or eight weeks for employees returning from maternity leave or adoption leave. The noble Lord, Lord Pannick, proposes with Amendments 83 to 89 to take out the employment law references in Clause 27, where it states what rights the employee shareholder will have that are different from those of an employee. This includes removing the distinguishing features of the clause and therefore it will remove choice from the options that employers can consider when taking on staff. The amendments would create an employment status that is essentially the same as that of "employee", but where the employee shareholder would be given fully paid-up shares. In effect, we would be regulating for an additional employment status that essentially already exists in that of "employee" in order for the individual to be given shares. As the noble Lord, Lord Pannick, knows-he is supported in this by the noble Lord, Lord Adonis-employee ownership, either through direct employee share holdings or shares held in trust on behalf of and for the benefit of employees, is already a well known concept that is in use in the labour market. Companies are already free to offer shares to their employees.
	My honourable friend Jo Swinson, the Minister for Employment Relations and Consumer Affairs, is chair of the implementation group taking forward the recommendations of the Nuttall review which is promoting the employee ownership agenda. The Government do not want to create an additional burden by regulating for something that can already take place in the labour market and that an employer can already offer. Such action would not help growth.
	I should like to answer some questions that were raised by noble Lords. First, my noble friend Lord Deben stated that, as he saw it, there was no support from business. I have listened very carefully today to the comments made by other noble Lords. It might be helpful for noble Lords to know that Neil Clifford, the chief executive of Kurt Geiger, the shoe retailer, has stated that this measure would,
	"provide a massive boost to innovation and enterprise".
	Becky McKinlay, who runs Ambition, a marketing communications company, is cited as saying that,
	"she would have welcomed such a scheme when she started her marketing communications company, Ambition, six years ago because she could not afford to outbid her peers on wages".
	I could go on.
	The noble Lord, Lord Pannick, raised the issue of why we think there is a statutory right to request flexible working and why it is unnecessary for employee shareholders. The statutory right to request flexible working creates a structure for conversations between employees and employers about changes to ways of working that will be mutually beneficial. Employee shareholders will have a greater interest in the performance of their employer as it is linked to the value of their shares. We consider that employee shareholders are more likely to request flexible working if they think it will help them and the company and do not need the statutory right to request. Employee shareholders can still make non-statutory requests for flexible working.
	My noble friend Lord Strasburger raised the issue of which rights will increase motivation. As we see it, this new employment status will increase motivation as the employee shareholder will own shares from the outset and capital gains on these shares of up to £50,000 will not attract capital gains tax.

Lord Strasburger: I thank the noble Viscount for giving way. That was not my question. My question was: which of the removed rights is going to increase the motivation of the employees and therefore improve the performance of the business?

Viscount Younger of Leckie: The overall package of the employee shareholder, with the extra risk as well as the extra reward, is designed to ally the employee with the employer more readily. The motivation will be there because the employee will feel more aligned to the objectives of the company and will help more towards building and growing the company. That is one of the clear objectives behind this scheme.
	The noble Lord, Lord Pannick, raised the issue of the legal consequences of selling rights. A full equality impact assessment has been done and no significant discrimination issues were identified. On the European law issues, I can reassure him that no European guaranteed rights have been affected.
	My noble friend Lady Brinton asked whether we can ensure that an employee shareholder is treated fairly and not sacked just because their employer does not like them or has argued with them. An employee shareholder would still retain the majority of protections such as, as I mentioned earlier, automatically unfair dismissal rights and rights underpinned by EU law and discrimination legislation. If an employee shareholder was dismissed in any other circumstances, they would not be able to claim unfair dismissal at an employment tribunal, which we understand. Employees do not get the general right to protection against unfair dismissal or to statutory redundancy pay until they have been with their employer for two years, so there are already employees who currently do not have these rights.
	In conclusion, Clause 27 creates a new employment status that gives companies and people more choice. This new status is a creative scheme for companies and people who wish to use it. It gives them a new opportunity to better share the risks and rewards of the business. I hope noble Lords realise that this new, innovative status is a force for good in the labour market, and that they will withdraw their amendments so that companies and people can benefit from this additional choice.

Baroness Brinton: I was slightly confused by some of the Minister's earlier response on the employee status for employee shareholders. I would welcome clarification on whether they are actually regarded as employees, generally, or whether the only respect in which they are not employees is where those rights have been specifically removed by the Bill.

Viscount Younger of Leckie: I can confirm that it is an entirely new status, so the individual who agrees with their employer to a contract to be an employee shareholder is not the same as an employee.

Lord Deben: Could my noble friend help the House, before we come to Report, by giving some estimate of how many businesses the Government think will take up this proposition? Given that many of us feel there will be few, it would be helpful to know why we need this big piece of legislation if we do not think many people will take it up. How many employee shareholders of this kind do the Government expect to have in two years' time?

Viscount Younger of Leckie: I thank my noble friend for that question. It is extraordinarily difficult to ascertain a precise figure. It can be only a guesstimate, and I hope that the House will respect that. However, from the figures that we have ascertained, we think that around 6,000 companies will look at this seriously and take up this issue. However, that is, as I say, a guesstimate.

Lord Strasburger: I am sorry to keep jumping up and down, but I still have not heard from the Minister how the withdrawal of all or any of the rights will improve the performance of any business.

Viscount Younger of Leckie: I believe that I have answered my noble friend's questions, and it is possible that I would not satisfy him, even if I gave him the same answer.

Baroness Turner of Camden: The Minister has just said that it is not clear whether an employee shareholder is an employee. I remind him of the advice that we have received from the Equality and Human Rights Commission, which looked at this situation in some detail. It came to the view that an individual who is an employee shareholder was nevertheless a worker, so workers' rights would normally be applied to that individual. The Government have tried to get over that by saying that because this is all voluntary, the employee voluntarily gives up their rights. During the course of our recent discussion, it has become clear that that is certainly not voluntary. In a situation in which people face either unemployment or the possibility of loss of employment support from the state, it is not really very voluntary, is it?

Viscount Younger of Leckie: It may help the noble Baroness if I state again that the employee shareholder agreement between the employer and employee is a specific new contract for a new employment status. However, if, for example, the employer has not fulfilled the basic criteria for ensuring that the employee is properly included and for meeting the criteria for that employee to be an employee shareholder, there is a default position whereby the employee shareholder would revert to being an employee or worker, whatever is applicable. There is a safeguard in place for them.

Lord Pannick: The noble Viscount said a few moments ago that it is the Government's estimate that up to 6,000 companies might wish to take advantage of Clause 27. Would he kindly undertake to publish before Report the evidence upon which that assessment has been made?

Viscount Younger of Leckie: I would be delighted to furnish the noble Lord with whatever information I can find, but I remind him-he may well know the statistic-that the total estimated number of businesses in the UK is 4,794,000. Therefore, breaking down the figure to 6,000 perhaps re-emphasises that this employee shareholder status is not for every company. It is aimed at a particular type of company, and it is important to round off this debate by emphasising that this is not as big a deal as some noble Lords are making it out to be.

Baroness Brinton: I apologise for intervening again. Can the noble Viscount explain what niche group of companies this provision would interest, given that in our discussion on the first group of amendments, when I outlined the problems facing high-tech, leading-edge companies going through rapid growth-which Ministers have told us was exactly the audience the clause was aimed at-the Minister said that it was probably not appropriate for them? Perhaps he could cite the type of company it is appropriate for.

Viscount Younger of Leckie: I re-emphasise that the Government stick by their idea and plan that the provision will suit small start-up companies, but not exclusively those. However, from my noble friend Lady Brinton's comments, it certainly does not seem to suit the companies that she has been in touch with, and I thoroughly respect that. I say again that this will not suit every company, but I have given quotations from individuals who seem to think that this is a good, innovative new scheme, which I very much welcome. I hope that it will take off, despite the fact that it is obviously quite contentious.

Lord Adonis: My Lords, we are full of admiration for the way the noble Viscount seeks to defend these proposals before the House. However, I am afraid that I find myself with the noble Lord, Lord Deben, who said that this was a mystifying moment in a mystifying Bill. The mystification gets greater the longer the Government seek to defend the proposal, and does so in three respects. The first is the figure of 6,000, which is in the impact assessment and which the Minister has undertaken to write to noble Lords to defend. However, I have read the impact assessment and the figure appears to be simply plucked out of the air. There seems to be no justification whatever for a figure of 6,000, as opposed to-

Viscount Younger of Leckie: I apologise for interrupting and thank the noble Lord for giving way. I made it absolutely clear that this was a guesstimate. When pressed by the noble Lord, Lord Pannick, on the figure, I felt it appropriate to give a figure to the House, and I am quite prepared to come back to the House on it. That figure may indeed change, but I reiterate it and suggest that it is not worth going further on this particular issue.

Lord Adonis: My Lords, all I need to do to let these proposals collapse is allow the noble Viscount to carry on speaking because, proposal by proposal, his case disintegrates. It turns out that the 6,000 figure is indeed a mystifying figure that has no basis in fact. I am thinking of why he might have chosen that figure-it appears to be twice as long as in the guidance for DWP decision-makers. Perhaps that is the basis on which the figure has been devised. We look forward to hearing the justification for it, and therefore whether this measure is incidental or fundamental.
	The truth is that the Government cannot possibly know. However, so far as your Lordships are concerned, we have a responsibility not to put on to the statute book provisions that could be seriously detrimental to the health of the nation. No part of the health of the nation is more significant than people at work and their rights there. It is not satisfactory simply to proceed with the provisions on the basis of figures that have been plucked out of the air.
	The second thing that has become clear is that the Government suffer from two fundamental problems of schizophrenia. They want more entrepreneurial zeal in the economy, as we all do, but almost none of the entrepreneurs to whom it looks to generate new companies, new ideas and new ventures supports the proposal and believes it will have the effect that the Government state. A number of noble Lords with a great deal more experience of business ventures than me have made that point. I think I quote the noble Lord, Lord Deben, correctly as saying that he could not imagine "any circumstances whatever" in which he would seek to offer these contracts to employees in a small start-up company as a way of motivating them.
	The fundamental problem that the Government have with the proposal-the basis upon which it has been put forward is that it will stimulate in the context of the lack of growth new, vitally needed entrepreneurial zeal and companies-is that the entrepreneurs and companies to which he is looking to provide that energy do not believe that this proposal is necessary. On the contrary, almost all of them are critical because they believe that the reputational damage that it will create may undermine the cause that the Government are seeking to promote.
	However, a third big tension that has come through clearly from the noble Viscount's remarks is that the Government speak with two voices. One part of the Government celebrates the extension of employment rights and says that that is a fundamental objective of the coalition Government established in 2010, at the very same time as another part of the Government celebrates the withdrawal of those rights as being necessary to stimulate the economy in a period of economic downturn. I have a view on these matters, but surely the Government should make up their mind which is true. Is the extension of employment rights essential to stimulate the economy to provide greater flexibility and protection for those at work, or is the withdrawal of those rights necessary to spur economic growth? At the moment, one Minister comes here on one day and says that it is the withdrawal of rights, and another Minister comes here on another day and says that it is the extension of rights.
	The noble Baroness, Lady Brinton, referred to the Deputy Prime Minister. At the very time the Bill was going through the House of Commons, he made a speech entitled, "Greater equality for a stronger economy". That was the title on his website. He said:
	"I can also confirm today that the Government will legislate to extend the Right to Request Flexible Working to all employees".
	At precisely the same time, this legislation was brought forward: legislation that withdraws the right to request flexible working to employees who are on these employee shareholder contracts.
	Are the Government not aware that there is a fundamental problem when one Minister says one thing and another Minister says another, and the two are totally at variance?

Baroness Brinton: That was indeed why I asked the noble Viscount about employee status and whether this was a new form that would circumvent that. On our Benches, we welcomed the Deputy Prime Minister's comments about increasing flexible working rights to all employees. I remain concerned that this is under threat for the employees of perhaps around 6,000 firms that may or may not take up this particular option.

Lord Adonis: My Lords, I note what the noble Baroness has said. I strongly support the extension of the right to request flexible working. I think what the Deputy Prime Minister said in that respect was a very positive step forward. I am seeking to reconcile what the Deputy Prime Minister said from the Benches 45 degrees away from me from what the noble Viscount has said, as I understand it, representing the same Government. This is about how we put together the different parts of the Government and understand what position is being presented to the House.
	Finally, I will comment on what the noble Viscount did not say. He did not respond to the point about the Beecroft report. The Beecroft report is of some significance and has been referred to by other noble Lords. My understanding of the genesis of this employee shareholder proposal is that, having sought to implement the Beecroft report and having been stopped from doing so by our colleagues on the Lib Dem Benches, in particular by the Secretary of State for Business, Innovation and Skills, the Chancellor of the Exchequer then sought to bring back the proposals in a watered-down form in return for the award of shares valued between £2,000 and £50,000. Vince Cable probably now regrets having done that deal, but he did so because he believed it would be niche and insignificant, although 6,000 is on the large side, if that is the figure the Government are now putting forward. He thought that if nobody took it up, this was a deal he could just about live with.
	However, the acute irony of the proposal before the House is the one which the noble Baroness, Lady Brinton, identified: that in respect of one of the fundamental rights being withdrawn-the right not to be unfairly dismissed-the Beecroft proposal for almost all employees who are likely to suffer under this scheme is significantly more generous than the shares for rights proposals encompassed in the Bill. The Beecroft proposal, as she said, required a tax-free payment related to the employee's salary up to a maximum of £12,000. I took Beecroft to be proposing that that would be the figure for the no fault dismissal fee: £12,000. The offer that employers who are seeking to recruit employees with minimal rights need to make is £2,000. That is, £2,000 in shares, the value of which may be significantly less when they come to trade them in.
	Given the choice between a firm contractual requirement to offer £12,000 for no fault dismissal, and £2,000 worth of shares that may be worthless by the time an employee comes to exercise them, Beecroft might actually turn out to be preferable. I beg leave to withdraw.
	Amendment 83 withdrawn.
	Amendments 84 to 92 not moved.
	Amendment 93
	 Moved by Lord Adonis
	93: Clause 27, page 36, line 5, at end insert-
	"(7) This section shall only come into operation after an independent assessment of the revenue implications for HMRC, conducted by the Office for Budget Responsibility, in respect of each financial year from 2014 to 2030, is laid before both Houses of Parliament."

Lord Adonis: My Lords, we are now on the issue of the cost of these proposals to the Exchequer. I would like to invite the noble Viscount to explain more fully to the House what he believes the revenue implications would be as a result of the proposals. The independent assessment by the Office for Budget Responsibility suggests very large figures might be at stake, which is why we are asking for figures to be made available in respect of each financial year up to 2030.
	I quote from the policy costings document published by the OBR alongside the Autumn Statement:
	"There are a number of uncertainties about this costing"-
	that costing being the figure of £80 million over the current spending review period-
	"The static cost is uncertain in part because of a lack of information about the current amount of CGT arising from gains on shares through their employer. The behavioural element of the costing is also uncertain for two main reasons. First, it is difficult to estimate how quickly the relief will be taken up; this could make a significant difference as the cost is expected to rise towards £1 billion beyond the end of the forecast horizon. Second, it is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning".
	I would like to invite the noble Viscount to expand on what the OBR said so that we have a better basis for understanding the potential costs of what could be an extremely expensive proposal once the tax planners get going on the opportunities available to them.

Baroness Brinton: My Lords, I apologise for referring again to the coalition agreement, but I am concerned that the tax loopholes proposed under the CGT allowances for employee shareholders conflict with the coalition agreement because the shares that a company gives to employee shareholders will not be liable to CGT.
	Paul Johnson, the director of the IFS, has said:
	"Just as government ministers are falling over themselves to condemn such behaviour, the same government is trumpeting a new tax policy which looks like it will foster a whole new avoidance industry".
	He refers to it as a "£1 billion lollipop". I am prepared to negotiate the billion with Paul Johnson on the understanding that it is only likely to affect a small number of companies. Or perhaps not, because we know that advisers to companies, if they find a loophole will find a way of making it apply to everyone.
	The Government have pledged in the coalition agreement to clamp down on tax loopholes and tax avoidance. The agreement says:
	"We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals".
	These include exactly what I have cited earlier. Why do the Government in the draft Finance Bill 2013 create this loophole where shareholders can avoid paying capital gains tax? I quote:
	"Legislation will be introduced to exempt all gains made on disposals of up to £50,000 worth of 'employee shareholder' shares from capital gains tax".
	The coalition agreement also says:
	"We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income".
	We have pledged, as a Government, to raise capital gains tax and yet we are removing it for shares related to employee shareholders. I support the amendment because we need to understand the cost to the Treasury. I would welcome an explanation from the Minister why it is acceptable for one small group of shareholders to be exempt from CGT when the Government are moving in the opposite direction for all others.

Lord Deben: I hope that my noble friend will be very careful in his response to this because underneath there are two falsities. The first is the schizophrenia on the side of the Opposition. On the one hand, they say that no one will be taking it up, and on the other hand they say that it might be very expensive. I do not think that the noble Lord, Lord Adonis, should get away with that argument.
	I also do not want him to take too seriously the comments about exempting people from capital gains tax. I declare an interest as the chairman of a number of small companies, which are, I hope, growing. I have the feeling that there is a kind of nastiness abroad on this issue, because capital gains tax is very much a destroyer of value and of enterprise. One problem in this country is that many people do not like other people being wealthy as a result of hard work and employment. I dislike that kind of attitude very much. If that is part of the coalition agreement, it is a bad part, because we need a society in which people are encouraged to put their lives into businesses and to gain some of the benefits of that. One reason the United States is so much more successful than other countries is that it has been more sensible about that bit of its taxation. It is very stupid about a lot of other taxation, but on that bit at least it has said that there is a real reason for encouraging people to create businesses. One way of encouraging them is by giving them a lower rate of tax on capital gains and dividends than they would have elsewhere. That seems perfectly right, and one problem that we have is that we have not taken that seriously.
	I am not worried about this proposal because I do not think that anyone is going to take it up and so they are not going to lose any money. However, I hope that my noble friend will be kind enough to suggest that the Government will do a great deal more to enable people, through employment, to create wealth and to take some of that wealth in a way that we do not allow them to do at the moment.
	It really is sad that we have a society in which it is perfectly proper to say, "We've really got to stop people possibly gaining from the creation of jobs". That is what we mean when we say that we want to make sure that nobody benefits. That is not what I want to happen-and it will not happen-but I hope that in his answers my noble friend will make sure that he does not commit the Government to not taking some pretty radical steps to remove and reduce taxation in a number of areas that will encourage job creation.

Baroness Brinton: I should like to clarify the point that I was trying to make about finding a tax loophole that provides a source of employment for many industry experts. We need a capital gains tax system which is fair and which certainly encourages growth. I do not think that we would suggest anything other than that from these Benches. The concern arises when, on the one hand, the Government say that they want to make a clear, open and transparent level playing field but then, on the other, they create a category that appears to have a built-in loophole.

Lord Deben: I am sorry if I misunderstood my noble friend, and of course I accept what she has just said. I find it very hard when the guns are turned on this issue because of the loose use of the words "tax loophole". This is not a tax loophole; it is a decision-a mistaken decision, I think-to encourage people to do something through a tax concession. I repeat: it is not a tax loophole. I shall tell noble Lords what a tax loophole is. It is Amazon organising itself so that it runs people out of the high streets of Britain by ensuring that it does not pay proper taxes. A tax loophole-I declare an interest as being concerned with the business of packaging recovery-is when Amazon can put packaging on the marketplace and not pay the proper price of so doing. That is what a loophole is. It is not a loophole if the Government specifically say that in particular circumstances people will pay a lower rate of tax. That is a proper use of the taxation system. For goodness' sake, do not let us use the term "loophole" in this instance. There are some very big loopholes which we ought to be stopping and, for me, Amazon is the biggest example of a company that does not pay proper tax wherever it operates.

Baroness Brinton: I apologise for intervening again and I thank the noble Lord for his contribution. There is absolutely no doubt that we agree about Amazon. Perhaps I may give an illustration from the early 1990s of the sort of loophole that I was alluding to. The Conservative Government of the day created generous tax facilities for investors in the business expansion scheme. When the scheme was originally devised, it was intended for small high-growth companies-where have I heard that before in this debate? Investors would get those tax benefits because they were investing in something that carried a slightly higher risk. I confess, as the bursar of a Cambridge college, that within two or three years every Oxbridge college, and subsequently every university in the country, used the business expansion scheme, and that tax benefit was quickly closed down by the Government, who described it as a tax loophole.
	It is exactly that sort of loophole that I want to avoid. I absolutely understand the Government saying that it is supposed to be a niche group of companies that will apply for this, although I still wait to hear which ones they are. However, I would not want to see some sort of tax provision that suddenly made this proposal attractive to the majority of companies in this country. That was not the intention and it certainly has not been the tenor of the debate.

Lord Deben: I do not disagree with that. However, I think that this proposal is going to be so unattractive to so many companies that that particular problem will not arise.

Viscount Younger of Leckie: My Lords, first, I am most grateful to my noble friend Lord Deben for extolling the virtues of employee ownership, which is very much part of the debate today.
	This amendment stipulates that the clause should come into effect only once an independent assessment, conducted by the Office for Budget Responsibility, is laid before both Houses setting out the impact on the Exchequer for each financial year between 2014 and 2030.
	The OBR's role is to provide independent scrutiny and certification of the Government's policy costings ahead of the Budget and the Autumn Statement. The OBR certified the costing of this measure submitted by HMRC using the methodology set out in the policy costings document published at the Autumn Statement, which is available on the HM Treasury website.
	The main duty of the OBR is to examine and report on the sustainability of the public finances. The OBR performs this duty independently, with complete discretion to determine the content of its publications and its work programme of research and analysis.
	The Government do not publish annual breakdowns of the cost of operating specific tax measures beyond the end of the forecast period, and this has been the case for some time. This will apply to the employee shareholder status in the same way as it applies to the cost of operating any other specific tax measures.
	The noble Lord, Lord Adonis, is understandably concerned about the need to support the Government's agenda for fiscal sustainability. I emphasise that we believe that investment in policies such as this one-aimed at reducing costs on business and increasing productivity -is exactly what is needed at this time. Strong, sustainable and balanced growth is the key to long-term fiscal sustainability. However, I assure the noble Lord that if further provisions are needed to limit its overall costs, we will have the opportunity to include these at a later date.
	At this stage, I think it is worth picking up some points that the noble Lord, Lord Adonis, raised concerning the OBR. The OBR, with its responsibility, is right to note that predicting the take-up of new policies such as this one is very difficult. We recognise that, but its comments need clarification. First, the OBR refers to tax planning and not avoidance. Encouraging take-up of this targeted employment policy should not be misconstrued as encouraging avoidance. Secondly, any rise towards £1 billion is estimated to occur well beyond the end of the forecast period-in fact, beyond the 2020s, when national income is likely to be more than twice as high in today's money. Finally, the draft legislation published on 11 December includes a number of anti-avoidance provisions. If further provisions are needed to address particular avoidance risks, we will have the opportunity to include them at a later date with a view to ensuring that this policy does not become disproportionately costly to the taxpayer.

Lord Adonis: Could I ask a specific question? The OBR said that it expected the cost of this policy to rise towards £1 billion beyond the end of the forecast horizon. Is that a figure that the Government accept?

Viscount Younger of Leckie: It gives me the opportunity to answer the noble Lord's question by saying that the OBR has stated that in the long term this policy could cost up to £1 million. That figure relates to the future period beyond the 2020s. However, there are uncertainties associated with costs so far into the future and I am sure that the noble Lord will appreciate that. The Government expect that the new employee shareholder status should help to stimulate business and entrepreneurial activity by affording businesses greater choice on the contract that they can offer to individuals while ensuring that appropriate levels of protection are maintained. If the policy achieves this aim, the cost, which is expected to reach £8 million in 2017-18, is proportionate. The draft legislation published on 11 December sets out a number of anti-avoidance provisions to prevent the manipulation of the capital gains tax exemption on shares received under the status. If further provisions are needed to address particular avoidance issues, as mentioned earlier, the Government will have the opportunity to include these at a later date with a view to ensuring that this policy does not continue.
	My noble friend Lady Brinton raised the issue of whether the tax incentives were in effect a tax avoidance scam, if I can put it somewhat indelicately. She did not put it in that indelicate way. The Government have already included provisions to deal with various types of possible abuse in the draft legislation on capital gains tax exemption. If other forms of abuse come to light, the Government will make the necessary changes to combat that with a view to ensuring that the policy does not become disproportionately costly to the taxpayer.
	Some concern has been raised, notably by my noble friend Lady Brinton about the capital gains tax exemption. This relates particularly to people taking up this new employment status, and although I touched on it slightly earlier, I shall address it directly. We believe that employee ownership is a good thing. We want people to become employee shareholders and to benefit from the exemption provided. Where it is used properly it should be seen as a measure of success and people should take advantage of this particular exemption. However, the draft Finance Bill published on 11 December takes a robust line on the potential misuse of the exemption and provides several measures that would prevent the misuse of employee shareholder employment status. There are rules to prevent those who control a company, such as company directors, holding exempt employee shareholder shares if they control 25% or more of the voting power in the company. Similarly, rules will prevent people connected to those who control the company, such as spouses or children, benefiting from the exemption. We will prohibit employees from benefiting from multiple £50,000 limits by entering into multiple consecutive employee shareholder contracts with related companies. Instead when related companies are involved, an employee will have a single £50,000 limit applying to all shares received by related companies. We will also ensure that those looking to get around the limit by using company liquidations to dispose of and then receive new exempt shares cannot do so. We will require two years to pass between the liquidation of the company and the employee receiving further exempt shares. This treatment strikes the right balance between preventing abuse and ensuring that genuine entrepreneurs are not unfairly hit.
	Finally, the legislation will prevent the manipulation of share values, for example, by placing restrictions on them so that an employee can receive shares that are in fact worth more than £50,000. For the purposes of the capital gains tax exemption the value of shares will be based on an unrestricted market share. Taken together the measures and the safeguards outlined in the draft legislation will ensure that the tax benefits of a new employment status can be misused. I hope that that goes some way to satisfying the noble Baroness, Lady Brinton.

Lord Deben: Is not the fact that if this works, arguing about how much it costs the Treasury is not sensible? If it works, it will create jobs and make wealth, and the cost to the Treasury will be nil. If it does not work, nobody will take it up and the cost to the Treasury will be nil. It seems to me that this is not a necessary discussion. The only thing that we do not want is for it to be misused. The noble Viscount has explained how the Government intend to do that. No doubt they will do their usual thing of bringing in some more measures to stop it if that were to happen. The real fact is that this is one part of the argument that really does not hold water. We have to accept that if it does not work we have wasted a bit of time, which is not terrible, but if it does work we will have been proved wrong and I will be happy about it. The Treasury will not lose out because there will be jobs, people employed and money being made, which is really worth while.

Viscount Younger of Leckie: I am grateful to my noble friend for clarifying that and, of course, he is absolutely right. I felt that it would be helpful to the House to outline the safeguards and to reiterate that the Government have thought very carefully about these issues. Taking up some of the comments made by my noble friend Lord Deben, I emphasise again that it is a risk-reward status as the employee shareholder. The award is: yes, the opportunity is there to be given from between £2,000 and £50,000 and to be aware that if it is £20,000, £30,000, or whatever the figure might be, and the share price happened to double, the total amount, including the doubling would be free from capital gains tax. That is the reward bit, but equally, I am also realistic enough to say that it is possible that the shares might indeed be worth nothing. That is the risk, and it is best to be quite straight and open about that particular issue. With that in mind I hope that the noble Lord is willing to withdraw the amendment.

Lord Adonis: My Lords, I do not intend to press the issue today. Let me be brief in response to the noble Viscount. We face a straightforward case of schizophrenia here. One part of the Government tells us that the biggest problem facing the country is debt and another part of the Government produces a proposal, which we are debating today, for a new tax break for substantial shareholders that the Office for Budget Responsibility estimates will ultimately cost up to £1 billion a year. When we debate the entirety of Clause 27 on Report, this latest example of schizophrenia will be one of the reasons why we will seek to delete it. I beg leave to withdraw the amendment.
	Amendment 93 withdrawn.
	Debate on whether Clause 27 should stand part of the Bill.

Lord Adonis: My Lords, I have put down a Motion that Clause 27 should not stand part of the Bill to stimulate a last, wider debate on the issue. I note that the noble Viscount has gone over the same ground several times and I feel for him at having to do it yet again. Perhaps our remarks before he speaks will encourage him to make some new points that will help inform the Committee.
	There are three essential points to be made on Clause 27, the first of which relates to the extension of employee share ownership. This is an objective that noble Lords in all parts of the House support. Indeed the Government had an official review-the Nuttall review-which reported last year on the extension of employee share ownership. That review made some 30 recommendations. I have the report here. Most of them were excellent recommendations, some of which the Government accepted and some of which they were unable to accept. I simply note that not one of those recommendations of the review that the Government set up specifically to promote wider share ownership related to the creation of an employee ownership scheme akin to the one that we are debating today, involved issuing shares in return for the giving up of employment rights.
	The question I want to ask the noble Viscount is: if this is such a good idea, why was it not recommended by Nuttall? Secondly, I want to reiterate all the specific problems relating to the scheme, which have become very clear in our debates this afternoon. There is the problem of compulsion in respect of benefit claimants and the opening to discrimination claims, which the noble Lord, Lord Pannick, highlighted. That could mean that there will be an explosion of very expensive and difficult cases before employment tribunals because of the removal of essential rights that will leave employees with no other recourse than discrimination when they believe that they have been badly treated. There is the problem of cost which we have just debated in the previous group of amendments, and a whole set of issues that we have not debated but which were debated in the House of Commons about the status of the shares themselves, such as the voting nature of the shares and how the shares will be tradable, given that most of them are intended to be among the 6,000 companies that the noble Viscount has highlighted. There are start-up companies whose shares will not be listed, so we must ensure that there is a market in which they can sell shares and terms under which they sell them, given that they may have to sell them back to their own companies when those companies are under some stress. There is a whole set of issues relating to the working of the scheme which makes it highly problematic and which may leave small shareholders, in particular, who do have not much money themselves without resources to take independent financial and legal advice. They could be very seriously exposed.
	The noble Lord, Lord Flight, told the Committee earlier that if he was 40 years younger, he would relish the opportunity to take advantage of the status and that it would have spurred him to the creation of new companies and new employment. If they were the groups we are talking about, that would be one case. But, as legislators, we are concerned that substantial numbers of employees who do not have access to financial and legal advice will be straightforwardly exploited by these provisions.
	The third point I make on the clause as a whole is that almost nobody to whom this proposal is targeted welcomes it. The Government's own consultation showed that an overwhelming majority of those who responded, including those who responded from within the business community, either thought that this proposal was irrelevant or were actively hostile to it. The noble Viscount cited a few instances earlier of individuals who support it. However, of the 219 consultation responses, only five welcomed the proposal. Five out of 219 is about the same ratio of supporters to opponents as we have seen in your Lordships' House as this proposal has been debated. That seems to me a compelling reason why the Government would be wise to withdraw the proposal before we debate it again at Report. I beg to move.

Lord Pannick: My Lords, I agree with all that has been said by the noble Lord, Lord Adonis. Clause 27 is wrong in principle. It contains inadequate safeguards both in relation to the loss of welfare benefits for those prospective employees who do not wish to give up their statutory employment rights, and also in respect of the need for legal and financial advice for those who are prepared to give up those rights. Clause 27 will also be expensive to the Treasury if there is a take-up, or there is going to be very limited demand. I note that the noble Viscount has attempted to provide the evidence on which the Government estimate that 6,000 companies may be interested in Clause 27. I look forward to seeing that material. I, too, very much hope that the Government will listen to the debates that we have had this afternoon, and take the wise step of withdrawing Clause 27 before we come to consider it again at Report.

Lord Flight: My Lords, although I welcome the suggestion that the Chancellor might allow there to be no income tax on grants of up to £2,000, as I understand it, the spirit of the provision is more about the go-getter employee shareholders. I would suggest that if there is income tax on amounts over £2,000, this scheme will not get anywhere because the amount of tax that people pay will be quite disproportionate to the risk they are taking on their equity and to the values-as the noble Lord, Lord Pannick, pointed out-of what they are giving up. It is important to sort out by the time we return on Report precisely what the income tax position will be.

Baroness Brinton: My Lords, I am grateful for the comments of the noble Lords, Lord Adonis and Lord Pannick. I will not repeat the detail but there are three or four brief points that I would like to make.
	I remain concerned about the clause in principle. After our debate today I am even more concerned about the confusion surrounding jobseeker's allowance recipients going for job interviews and about some of the details of the eligible tax benefits. It is also clear that employers do not want it: the estimate of 6,000-given the response to the consultation to which the noble Lord, Lord Adonis, referred-really says it all. Very few employers want it.
	The noble Viscount referred to the balance of the risk and reward but there is another "r" in the equation that he did not mention. He omitted reduction-the reduction of rights for employees certainly seems to counterbalance the risk/reward of a long-term holding of shares. That remains one of the most worrying elements of this clause.
	Finally, I want to reiterate the point about breaching the coalition agreement specifically in relation to flexible working. I believe that the coalition agreement talks about flexible working for all employees, not excluding one particular small cohort who may have shares that may be of value at some point in the future, but also in relation to any compensation for unfair dismissal where the proposals of the Government are worse than Beecroft.
	I hope the Minister will take on board the comments that were made this afternoon. I would prefer the clause to be removed, but it will certainly need substantial amendment at Report if it is to be anywhere near fit for purpose.

Baroness Donaghy: My Lords, I have not spoken to the other amendments to the Bill although I did refer to this issue on Second Reading. Rather than repeat what has already been said extremely eloquently by previous speakers, I just want to remind the House what the Employee Ownership Association has said about this clause. They are the people who are most close to this subject and have the most interest in making sure that this area flourishes, which I think we would all want to happen. The association said:
	"Our Members have three main concerns on this matter.
	Firstly, proposed legislation has appeared in a Bill before the Government consultation on the possibility of deploying this model of employee ownership has finished. Indeed it has only just started.
	Secondly, our Members are very aware that there is no need to reduce the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost the number of employee owners. Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of employee owners.
	Thirdly, the appearance of this measure in the Growth and Infrastructure Bill appears to our Members to be completely disconnected"-
	as my noble friend Lord Adonis has said-
	"to the recommendations in the Nuttall Review. That Review contained a series of recommendations on how to grow employee ownership and none of those recommendations suggested the dilution of worker rights".
	I think that that says it all.

Viscount Younger of Leckie: My Lords, we have heard many opinions about this clause. The Government are taking this action to offer flexibility and choice for both companies and people, and this is the right thing to do. The Government know from their engagement with employer organisations and business that there is concern about facing weak or vexatious claims in employment tribunals. This new employment status will address some of these concerns especially in new and fast-growing companies. Importantly, this new status gives people the opportunity to own part of their company and benefit from any growth with favourable tax treatment, which was mentioned earlier in our debate today. Employee shareholders will receive at least £2,000 of shares in the employing company or its parent company. Gains on the first £50,000-worth of these shares will not be subject to capital gains tax. Employee shareholders will have different employment rights compared to employees and workers.
	Before a company offers a person an employee shareholder contract, they will need to think carefully about the implications of offering equity in their company. There are many possible implications, but the current owners will first need to be comfortable with diluting their shareholding, an issue which was raised by my noble friend Lady Brinton earlier. If the shares being offered are part of a fresh issue of shares, this will result in each existing shareholder holding a smaller share in the company. This may not be something that the existing shareholders would be willing to do, particularly if they worked hard to build the company up and invested time, money and know-how in that company.
	It is important to recognise that an owner of a company, when giving shares to an employee shareholder, is giving away not only the value of the shares issued but possibly a share in the future profits and some of the control. Offering shares to employee shareholders could in some circumstances lead to a shift in the balance of power in the company. Companies will also need to consider if they can afford to issue shares to potential employee shareholders. If they can, it could impact on the dividends of existing shareholders or reserves being reduced.
	The rewards for both parties could be significant. Let us remember that companies will have completed an extensive recruitment and selection process, ensuring that any new personnel have the right mix of skills and knowledge. Therefore they will not offer this new status of employee shareholder lightly. A growing company may consider that by offering this new status they are demonstrating a long-term commitment to that person. In turn, the employee shareholder will be able to reap the rewards of a successful company.
	I reiterate that this status will not be suitable for all, just those where it makes commercial sense for both parties. We envisage such companies to be those that want to encourage a culture of engagement and shared ownership and-this is the most crucial point-where they expect significant growth and want to use this incentive to attract and retain high-calibre individuals.
	Similarly, a person being offered an employee shareholder contract will need to consider the implications of being an employee shareholder. This is a most important point to emphasise. They will need to consider carefully the terms and conditions of the employment on offer and decide whether it is suitable for them in both the long and short term, as we all know that the value of shares can go both up and down. Some potential employee shareholders may not disclose at interview their long-term career plans. Perhaps they expect to stay in the role for only a short time. It may be that they are moving abroad in the future or expect to undertake further studies-that is their own business-and they may not want to invest their time in a company to realise long-term rewards. Equally, someone looking only for short-term work may consider that this is exactly the right kind of contract as they could benefit from any short-term growth in the share value.
	To ensure that this new employment status is suitable for both the company and employee shareholder, both will need to be confident that the status is right for them. This means that the company may have to sell its growth prospects to the potential employee shareholder as both a viable investment as well as a potential employer.
	It is important that we take time to understand how this new status will work in practice and I am sure that doing so will allay some concerns that have already been raised. Clause 27 establishes three clear qualifying criteria, all of which must be fulfilled before a person can be considered an employee shareholder. The first criterion is that the person must agree to become an employee shareholder-it is their choice. Secondly, the person must receive at least £2,000-worth of shares in the employing or parent company that are fully paid up at the commencement of the employment. This means that these shares will have no debts attached to them. Finally, the individual must not make any payment, in money or in other form, for the shares given. If any of these criteria are not fulfilled and the person is still taken on by the company, they are likely to be legally considered an employee. This, again, addresses the question raised by the noble Baroness, Lady Turner, earlier. This means that they will have all the employment rights of an employee.
	I recognise that there have been some concerns that existing employees will be coerced into accepting a change to their employment contract that would make them employee shareholders rather than employees. The Government do not want people to be coerced into the new employment status. This is why Clause 27 establishes clear protections for existing employees. The clause creates two new employment rights-the right not to be unfairly dismissed and the right not to be subjected to a detriment if an employee turns down an employee shareholder contract. This means that if an employee chooses not to sign an employee shareholder contract and is then overlooked for promotion or disadvantaged in any other way, that person could present a claim to an employment tribunal. Secondly, if an employee does not sign an employee shareholder contract and is dismissed for refusing to do so, it would be automatically unfair.
	It is clear that all parties will need to consider carefully whether this status is right for the company. Giving away equity is not to be done lightly and many will not think that this is the right course of action for them. Potential employee shareholders will need to consider whether they want to have shares in the company. To help both parties, the Government will be offering guidance on what both individuals and companies will need to consider before entering into a contract of this type. The House will not need any reminder that we discussed guidance earlier today.
	Clause 27 stipulates that the minimum value of shares is £2,000 in the employing or parent company. The clause does not stipulate the type of shares that a company can issue, nor does it stipulate the type of shares issued. We believe that this is best decided by the companies in order to suit their commercial situation. The shares may have varying rights, but it is up to them to decide what is right for both parties. Some companies may want to offer significantly more than the £2,000 minimum value of shares. In some companies, new employee shareholders will want to be fully involved as the company grows and take an active role in the progress of the company.
	The Government have considered what happens to the shares when an employee shareholder leaves the company they work for. We expect that employers and employee shareholders will agree sensible terms for the disposal and buyback of shares. These terms should normally be part of the contract that the employee shareholder signs. However, many different scenarios might result from an employee shareholder holding shares. The shares' value may change; the shares may have been traded; in other cases, the employee shareholder may want to keep hold of the shares on leaving the employment and the company may agree to this. The Government do not want to make rules that tie the employers' hands; they want to give them flexibility in what they and the employee shareholder decide is the best way to dispose of shares at the end of the employment relationship.
	However, the Government recognise people's concerns that employee shareholders could be at a financial disadvantage if companies decide not to offer a fair way of realising the value of their shares. The Government amended the clause in the other place to include a provision to provide power to regulate buyback where the company has undertaken to buy back shares.
	I shall now answer briefly some, if not all, of the questions raised by noble Lords in this debate on the clause. First, the noble Baroness, Lady Donaghy, raised the issue of who was supporting this new status. I could give many quotes but a powerful one has come from the major legal firm of Freshfields. It says:
	"For companies whose shares have a real potential for significant growth over a relatively short period, the free gift of shares combined with the available capital gains tax relief may assist companies in attracting and being able to hire, or indeed retain, high calibre or skilled employees who may be prepared not only to waive the required employment rights but to accept below market salaries. This may assist small cash-strapped enterprises".
	The noble Lord, Lord Adonis, raised the issue of the consultation process. He said that he thought the consultation responses showed no or very little support for the measure-in other words, why were we continuing with it? We consulted on how to implement this option but not on whether we should proceed in principle. It is a good additional option for companies and individuals. It adds to the existing status of employee and worker and provides those taking it up with flexibility as well as with an opportunity to share the reward and risk that comes with having an interest in a growing company. We recognise, again, that not all companies will wish to use this new status, and that is entirely understandable. What is important is to give those companies which wish to take people on in this different way, and to award them share equity, an opportunity to do so.
	The noble Lord, Lord Adonis, raised the issue of the Nuttall review and asked how this fits in with the employee ownership agenda. "Why was this not recommended by Nuttall", I think was the precise question that he asked. It is important not to confuse employee shareholders with the employee ownership agenda. Some companies may wish to offer employee shareholder contracts to their workforce to encourage ownership. It is one of many ways of encouraging ownership. The employee shareholder status is separate from the Nuttall review as it is a new employment status.
	In conclusion, I return to my opening remarks. The aim of this employment status is to offer people and companies further flexibility and choice in the employment contracts they may use. Removing the clause from the Bill would deny this opportunity to companies and people who have the appetite to share in the risks and rewards of a growing company.
	Clause 27 agreed.
	Amendment 94 not moved.
	Clause 28 agreed.
	Amendment 95
	 Moved by Lord Flight
	95: After Clause 28, insert the following new Clause-
	"Guidance on employee shareholder status
	The Secretary of State shall, within two months beginning with the day on which this Act is passed, set out in guidance-
	(a) the preferential tax treatment applicable to employee shareholder status including illustrative examples;
	(b) the respective rights of-
	(i) employee;
	(ii) employee shareholders; and
	(iii) worker employment status;
	(c) an explanation of how employee shareholder status gives individuals a share in the risk of companies; and
	(d) a model employee shareholder contract for early stage companies."

Lord Flight: My Lords, the amendment was intended to be part of the debate on Clause 27. Given that the employee shareholder status is new and that there are still differences of view about its structure, it is obvious that there will be a need for guidance and, in particular, a need for a model employee shareholder contract for early-stage companies. I beg to move.

Viscount Younger of Leckie: My Lords, in Amendment 95 my noble friend Lord Flight proposes a new clause relating to the publication of guidance on the new employment status. He makes a good point on the need for guidance. The Government agree that guidance should be available to help companies and employee shareholders fully understand all the implications of offering or accepting these contracts. It has always been our intention to publish guidance on the new status. The issue of guidance is an important one. Good, clear and accessible guidance will be vital to both companies and employee shareholders. We want to ensure that people enter into these contracts with their eyes open.
	I will outline what the Government propose to publish by way of guidance and explain what that guidance will cover. The .gov.uk website is the new centralised place for publication of government services and information. The website already has a number of pages that provide an overview of the different types of employment status-such as worker and employee-and list the rights that are attached to them. We will provide an equivalent page on the new employee shareholder status.
	Within these overview pages there are links to more detailed information on each individual employment right, and these pages will also be updated to take account of the new employment status. People who look for information on employee shareholder contracts will be very clear which rights they are entitled to and which rights do not apply to the status. This will help them to decide if an employee shareholder position is suitable for them.
	Changes to these pages are being revised at the moment and we will be in a position to share draft copies with you before this clause is debated on Report. The Government will also update guidance on the tax treatment of shares and capital gains tax to make it clear to employee shareholders what their obligations are and to set out how the associated capital gains tax exemption and other relevant tax treatments will work.
	Any contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. We believe that contracts work best when people and companies are free to decide the terms that best suit their business needs, and to attract the right people to their companies. We will provide guidance for companies to enable them to understand the new status. Companies would do well to take note of the comments of my noble friend Lord Flight on the importance of drawing up good employment contracts that apply equally to the statuses of employees and worker.
	While I understand my noble friend's intention behind this amendment, we believe it is not necessary to legislate on this matter. To state this in Bill would just introduce more legislation, which in turn would create more red tape for businesses. As the Government have already committed to publish guidance, I hope that with these assurances my noble friend will be willing to withdraw his amendment.

Baroness Brinton: I apologise for intervening. I am grateful for many of the points the Minister raised about guidance and other things that will come forward to us, I hope, before rather than on Report. On a technical point, I wonder whether those who raised issues in this debate could be copied into any correspondence rather than it just going to the single noble Lord who raised the point.

Viscount Younger of Leckie: My noble friend makes a very fair point. Of course I will copy in all noble Lords who should or would like to be copied in.

Lord Flight: I thank the Minister for his response. I am pleased to find that the matter is in hand. I therefore beg leave to withdraw the amendment.
	Amendment 95 withdrawn.
	Clauses 29 to 32 agreed.
	House resumed.
	Bill reported with amendments.

Mid Staffordshire Foundation Trust Inquiry
	 — 
	Statement

Lord Hill of Oareford: My Lords-

Lord Campbell-Savours: My Lords, will the Minister make it clear that brief interventions are required? Otherwise not everyone will be heard.

Earl Attlee: The noble Lord has taken the words out of my mouth.

Lord Hill of Oareford: My Lords, with the leave of the House I will now repeat a Statement made earlier in another place by my right honourable friend the Prime Minister. The Statement is as follows:
	"Today Robert Francis has published the report of the public inquiry into the Mid Staffordshire NHS Foundation Trust.
	Mr Speaker, I have a deep affection for our National Health Service. I will never forget all of the things doctors and nurses have done for my family in times of pain and difficulty. I love our NHS. I think it is a fantastic institution and a great organisation that says a huge amount about our country and who we are. I always want to think the best about it. I have huge admiration for the doctors, nurses and other health workers who dedicate their lives to caring for our loved ones.
	Nevertheless, we do them-and the whole reputation of our NHS-a grave disservice if we fail to speak out when things go wrong. What happened at Mid Staffordshire NHS Foundation Trust between 2005 and 2009 was not just wrong, it was truly dreadful. Hundreds of people suffered from the most appalling neglect and mistreatment. There were patients so desperate for water that they were drinking from dirty flower vases. Many were given the wrong medication, treated roughly, or left to wet themselves and then to lie in urine for days. Relatives were ignored or even reproached when they pointed out the most basic things which could have saved their loved ones from horrific pain or even death. We can only begin to imagine the suffering endured by those whose trust in our health service was betrayed at their most vulnerable moment. That is why I believe it is right to make this Statement today.
	There was a healthcare commission investigation in 2000; a first independent inquiry from Robert Francis in February 2010; and, long before that, the testimony of bereaved relatives such as Julie Bailey and the Cure the NHS campaign. They all laid bare the most despicable catalogue of clinical and managerial failures at the trust. But even after these reports, some really important questions remained unanswered. How were these appalling events allowed to happen and how were they allowed to continue for so long? Why were so many bereaved families and whistleblowers who spoke out ignored for so long? Could something like this ever happen again? These were basic questions about wider failures in the system-not just at the hospital but right across the NHS, including its regulators and the Department of Health. That is why the families called for this public inquiry and that is why this Government granted one. I am sure that the whole House will want to join with me in expressing our thanks to Robert Francis and his entire team for all their work over the past three years.
	The inquiry finds that the appalling suffering at Mid-Staffordshire hospital was primarily caused by a "serious failure" on the part of the trust board, which failed to listen to patients and staff and failed to tackle what Robert Francis calls "an insidious negative culture involving a tolerance of poor standards and a disengagement from managerial and leadership responsibilities". But the inquiry finds that the failure went far wider. The primary care trust assumed that others were taking responsibility and so made little attempt to collect proper information on the quality of care.
	The strategic health authority was "far too remote from the patients it was there to serve, and it failed to be sufficiently sensitive to signs that patients might be at risk". Regulators, including Monitor and the then Healthcare Commission, failed to protect patients from substandard care. Too many doctors "kept their heads down" instead of speaking out when things went wrong. The Royal College of Nursing was "ineffective both as a professional representative organisation and as a trade union", and the Department of Health too remote from the reality of the services that they oversee.
	The way Robert Francis chronicles the evidence of systemic failure means we cannot say with confidence that failings of care are limited to one hospital. But let us also be clear about what the report does not say. Francis does not blame any specific policy; he does not blame the previous Secretary of State for Health; and he says we should not seek scapegoats. Looking beyond the specific failures that he catalogues so clearly, I believe we can identify in the report three fundamental problems with the culture of our National Health Service.
	The first is a focus on finance and figures at the expense of patient care; Francis says that explicitly. This was underpinned by a preoccupation with a narrow set of top-down targets pursued in the case of Mid Staffordshire to the exclusion of patient safety or listening to what patients, relatives-and indeed many staff-were saying.
	Secondly, there was an attitude that patient care was always someone else's problem. In short, no one was accountable. Thirdly, he talks about defensiveness and complacency. Instead of facing up to and acting on data which should have implied a real cause for concern, Francis finds, all too often, a culture of explaining only the positives rather than any critical analysis. Put simply, managers were suppressing inconvenient facts in favour of looking for comfort in positive information.
	That is one of the most disturbing findings. It is bad enough that terrible things happened at that hospital, but this inquiry is telling us is that there was a manifest failure to act on the data available not just at the hospital but more widely. As Francis says:
	"In the end, the truth was uncovered ... mainly because of the persistent complaints made by a determined group of patients and those close to them".
	The anger of the families is completely understandable. Every honourable Member in this House would be angry-furious-if their mother or father were treated in this way, and rightly so.
	The previous Government commissioned the first report from Robert Francis and, when he saw that report, the former Secretary of State, now the shadow Health Secretary, was right to apologise for what went wrong. This public inquiry not only repeats earlier findings but also shows wider systemic failings, so I would like to go further as Prime Minister and apologise to the families of all those who have suffered for the way that the system allowed such horrific abuse to go unchecked and unchallenged for so long. On behalf of the Government-and indeed our country-I am truly sorry.
	Since the problems at Mid Staffordshire Hospital first came to light, a number of important steps have been taken. The previous Government set up the National Quality Board and the quality accounts system. This Government have put compassion ahead of process-driven bureaucratic targets and put quality of care on a par with quality of treatment. We have set that out explicitly in the mandate of the NHS Commissioning Board, together with a new vision for compassionate nursing. We have introduced a tough new programme for tracking and eliminating falls, pressure sores and hospital infections, and we have demanded nursing rounds every hour, in every ward of every hospital.
	However, it is clear that we need to do more. We will study every one of the 290 recommendations in today's report and respond in detail next month, but the recommendations include the three core areas-patient care, accountability and defeating complacency-on which I believe we should make more immediate progress. Let me say a word about each.
	The first is how we put patient care ahead of finances. Today, when a hospital fails financially, its chair can be dismissed and the board suspended, but failures in care rarely carry such consequences. That is not right. We will create a single failure regime where the suspension of the board can be triggered by failures in care as well as failures in finance, and we will put the voice of patients and staff at the heart of the way that hospitals go about their work.
	In Mid Staffordshire, as far back as 2006, there was a survey in which only about a quarter of staff said that they would actually want one of their own relatives to use the hospital they worked in. During the following two years, bereaved relatives produced case after dreadful case and campaign after chilling campaign, but those voices and horrific cases were ignored. Indeed, the hospital was upgraded to foundation trust status during that period. We need the words of patients and front-line staff to ring through the boardrooms of hospitals and beyond to the regulators and the Department of Health itself.
	From this year every patient, every carer, every member of staff will be given the opportunity to say whether they would recommend their hospital to their friends or family. This will be published and the board will be held to account for its response. Put simply, where a significant proportion of patients or staff raise serious concerns about what is happening in a hospital, immediate inspection will result and suspension of the hospital board may well follow.
	Quality of care means not accepting that bed sores and hospital infections are somehow occupational hazards and that a little of them is somehow okay. They are not okay. They are unacceptable-full stop, end of story. That is what zero harm means. I have asked Don Berwick-who has advised President Obama on this issue-to make zero harm a reality in our NHS.
	Francis makes other recommendations. Today, you can give hands-on care in a hospital ward with no training at all. Francis says that that is wrong, and I agree. Some simple but profound things need to happen in our NHS and our hospitals. Nurses should be hired and promoted on the basis of having compassion as a vocation, not just academic qualifications. We need a style of leadership from senior nurses which means that poor practice is not tolerated and is driven off the wards. Another issue is whether pay should be linked to quality of care rather than just time served at a hospital. I favour this approach.
	Secondly, there is accountability and transparency. The first Francis report set out clearly what happened within Stafford hospital. It should have led to those responsible being brought to book by the board, the regulators, the professional bodies-and, yes, even by the courts. But this did not happen.
	Most people will want to know why on earth not. We expect hospitals to take disciplinary action against staff who abuse their patients. We expect professional regulators to strike off doctors and nurses who seriously breach their professional codes, and, yes, we expect the justice system to prosecute those suspected of criminal acts, whether they take place in a hospital or anywhere else. In Stafford, these expectations were badly let down. The system failed. That is one of the main reasons we needed this inquiry.
	Now that the recommendations about systemic failure are public, the regulatory bodies in particular have difficult questions to answer. The Nursing and Midwifery Council and the General Medical Council need to explain why, so far, no one has been struck off. The Secretary of State for Health has today invited them to explain what steps they will take to strengthen their systems of accountability in the light of this report, and we will ask the Law Commission to advise on sweeping away the Nursing and Midwifery Council's outdated and inflexible decision-making processes.
	The Health and Safety Executive also needs to explain its decisions not to prosecute in specific cases. Indeed, Robert Francis makes a strong argument that the executive is too distant from hospitals and not the right organisation to be focusing on healthcare and criminal prosecutions in such cases. We will look closely at his recommendation to transfer the right to conduct criminal prosecutions from the Health and Safety Executive to the Care Quality Commission.
	Thirdly, we must purge the culture of complacency that is undermining care in our country. This requires a clear view about what is acceptable and what is not. In our schools, we have a clear system of deciding whether a school has the right culture and whether it is succeeding or failing. It is a system based on the judgment of independent experts, who walk the corridors of the school and analyse more than just statistics. The public therefore know which schools near them are outstanding and which are failing. They have a right to know the same about our hospitals. We need a hospital inspection regime that does not just look at numerical targets but examines the quality of care and makes an open, public and explicit judgement.
	So I have asked the Care Quality Commission to create a new post-a Chief Inspector of Hospitals-to take personal responsibility for this task. I want the new inspections regime to start this autumn. We will look at the law to make sure that the inspector's judgment is about whether a hospital is clean, safe and caring, rather than just an exercise in bureaucratic box-ticking. In the mean time, I have asked the NHS Medical Director-Professor Sir Bruce Keogh-to conduct an immediate investigation into care at hospitals with the highest mortality rates and to check that urgent remedial action is being taken.
	Complacency in the system has meant that all too often, patient complaints have been ignored. I am today asking the honourable Member for Cynon Valley and the Chief Executive of South Tees Hospitals NHS Foundation Trust, Tricia Hart, specifically to advise how hospitals in the NHS should handle complaints better in future.
	I have talked today about some of the systemic failures, but at the heart of any system are the people who work in it and the values and vocation that they hold. As Francis says early on in his report, and it is worth me quoting in full:
	'Healthcare is not an activity short of systems intended to maintain and improve standards, regulate the conduct of staff, and report and scrutinise performance. Continuous efforts have been made to refine and improve the way these work. Yet none of them, from local groups to the national regulators, from local councillors to the Secretary of State, appreciated the scale of the deficiencies at Stafford and, therefore, over a period of years did anything effective to stop them'.
	What makes our National Health Service special is the very simple principle that the moment you are injured or fall ill, the moment something happens to someone you love, you know that whoever you are, wherever you are from, whatever is wrong, however much you have in the bank, there is a place you can go where people will look after you and do everything they can to make things right again. The shocking truth is that this precious principle of British life was broken in Mid Staffordshire. We would not be here today without the tireless campaigning of the families who suffered so terribly, and I am sure that the whole House will join with me in paying tribute to their incredible courage and determination over these long and painful years.
	When I met Julie Bailey and the families again on Monday, she said to me that she wanted the legacy of their loved ones to be an NHS safe for everyone. That is the legacy that together we must secure. I commend this Statement to the House".
	My Lords, that concludes the Statement.

Lord Hunt of Kings Heath: My Lords, I thank the noble Lord the Leader of the House for repeating the Prime Minister's Statement and also for the tone that he has adopted in repeating the Statement. I remind the House of my health interest in the register.
	The NHS represents the best values of this country, but what happened at Stafford was an appalling betrayal of those values. We all place trust in the National Health Service. We expect hospitals to be places of the utmost compassion and the highest standards of care. However, at Stafford patients became victims, left lying in soiled sheets, with untreated bedsores, desperately calling for help, but with no response. Relatives who pleaded for assistance were ignored or even made to feel intimidated. I join the noble Lord the Leader of the House in paying tribute to all those former patients, relatives and staff who came forward to speak out, including those who gave evidence to this and to previous inquiries. I also thank Robert Francis for his work on this and his previous inquiry.
	What happened at Stafford was not typical of the NHS. Day in, day out, the vast majority of those who work in the NHS deliver great care to patients up and down the country. They are as horrified at all of this as we are. When the first investigation laid bare the facts in 2009, the then Prime Minister apologised on behalf of the Government and the NHS to the patients and families who suffered so badly at Stafford hospital. He was right to do so. I reaffirm that today and our thoughts are with all the victims and their families. What happened has no place in any NHS hospital. We must ensure that it does not and cannot happen again.
	Today's report makes clear that primary responsibility for what happened lay with the board of the hospital. However, there are wider lessons that politicians on all sides must learn, including a lesson for all parties about the dangers of frequent reorganisations of the NHS.
	I should like to ask the noble Lord the Leader of the House some specific questions. First, regarding the voice of the patients, effective regulation is essential, but regulators cannot be everywhere, spotting every problem. Patients, their families and staff are everywhere, so we must ensure that they are properly heard. The challenge is to change the culture of the NHS and to support rather than to shut out people who complain. The NHS constitution offers protection for whistleblowers and we support moves to strengthen that. However, the report also highlights criticisms and concerns about both previous and current arrangements for patient bodies. Does the noble Lord agree that, whatever bodies we choose to represent patients, they need to be independent and to have the powers to be an effective voice and challenge to the system. I am sure the noble Lord will have had reported to him last night's debate on the regulations in relation to local Healthwatch and concern that, as they were drafted, they restrict the activity of local Healthwatch to campaign. I wonder whether, as part of the consideration of the recommendations of the Francis review, the Government would agree to look at the remit and powers of local Healthwatch in order that we might consider strengthening them.
	I move to the question of staffing. The basic requirements of any NHS hospital are that there are sufficient staff to look after patients and that they act with compassion. In too many cases at Stafford, this did not happen. Compassion should always be at the heart of nursing, and it needs to be at the heart of nurse training. We support moves to make this more central to nurse training. As Robert Francis has previously said in explaining what went wrong,
	"the overwhelmingly prevalent factors were a lack of staff, both in terms of absolute numbers and appropriate skills".
	Does the noble Lord accept the report's point that we need to consider benchmarks on staff numbers and skills? Can the noble Lord comment on any resource implications that follow from such agreement? Noble Lords will be aware that many NHS trusts are facing severe financial challenges at the moment. Do the Government consider that the NHS has enough resources to ensure that it has the right number of staff in place? This morning the Prime Minister assured the other place that funding is there, but I wonder whether we can be so confident.
	My third question relates to regulation. The problems at Stafford should have been picked up much earlier. Monitor and the Healthcare Commission should have worked together much more closely. The Francis report recommends that the two should come together or evolve into a merger. I was rather surprised to read on the Health Service Journal webpage tonight that the Secretary of State has already rejected this recommendation. I was very surprised because in the Statement that the noble Lord has just repeated he said that every recommendation would be studied fully. Can he confirm whether a decision has been made that a merger of Monitor and CQC will not take place? That is a very important matter.
	In his Statement the Prime Minister also said that a chief inspector of hospitals would be appointed in the autumn. Can the noble Lord confirm that legislation would be required for that, or is there to be an instruction to CQC to make such an appointment? Is it intended that the remit of the chief inspector of hospitals should cover other parts of the National Health Service? Will there be a chief inspector of primary care? Will there be a chief inspector of social care? Is it intended that the chief inspector will become in effect the boss of CQC, or is this to be a separate appointment? If it is to be a separate appointment, will this person hold independent office, or will he or she be part of the managerial hierarchy of CQC?
	Robert Francis rightfully made a great deal of the importance of patient safety. He also referred to the functions of the former National Patient Safety Agency with regard to incident reporting. He said:
	"More could be made of this important source of information".
	The noble Lord will be aware that the Health and Social Care Act abolished the National Patient Safety Agency. As part of their consideration of the recommendations of Francis, I ask that the Government consider re-establishing the National Patient Safety Agency as a wholly independent organisation.
	I come to the question of healthcare assistants, who do so much important work in our hospital wards and communities. Does the noble Lord agree that we need training and registration to improve standards and safety? In paragraph 1.194 of the summary of Robert Francis's findings, he makes the point that,
	"healthcare support workers ... are not subject to any system of registration".
	He says firmly:
	"A registration system should be created under which no unregistered person should be permitted to provide for reward direct physical care to patients currently under the care and treatment of a registered nurse or a registered doctor or who are dependent on such care by reason of disability or infirmity in any hospital or care home setting".
	I am sure the noble Lord will have been briefed that in our debates on the Health and Social Care Bill as it went through your Lordships' House we argued strongly for there to be regulation of healthcare assistants. The Government resisted that. In their consideration of the Francis inquiry recommendations, will they now give sympathetic consideration to the registration of healthcare workers?
	I come to my fourth question, which concerns foundation trusts. I am the chair of a foundation trust. I am enthusiastic for them, as I think are many noble Lords on both sides of the House. The journey to foundation status has been a beneficial process for many trusts, but in the case of Stafford it was not. Has the noble Lord made any reassessment of the current timetable for a trust to achieve foundation status and whether more flexibility is needed? Can he assure me that no pressure will be put on the NHS Trust Development Authority to speed up the authorisation of foundation trusts?
	The original government intention was for all NHS trusts to become foundation trust by 2014. I understand that that has slipped. I should be grateful if the noble Lord would confirm that the essential requirement is that a trust is ready to become a foundation trust, not having to fit a timetable that would lead to the kind of pressures that the Mid Staffordshire trust clearly felt itself under.
	That brings me to targets. It was suggested, in the briefing before the report was published, that targets themselves were to blame. However, today's report does not support that. It says that,
	"it is not suggested that properly designed targets, appropriately monitored, cannot provide considerable benefit to patients".
	Does the noble Lord accept, as Francis's analysis suggests, that the problem at Stafford was how the A&E target was managed by the hospital, and that many hospitals up and down the country have delivered excellent care while meeting the accident and emergency target? We must never go back to the bad old days when people were left waiting for hours on trolleys and 18 months for an operation.
	I turn to integration. The ageing society is bringing a whole new set of demands on to the NHS: a group of elderly and infirm patients who require not just physical treatment for their immediate illness but much greater care and attention for their basic needs. As Francis says, we must address this new challenge that the NHS faces and ensure that we avoid a repeat of what happened at Stafford. Does the noble Lord agree that in every hospital we need to put in place the right support for the whole of a person's needs, including for our elderly population? Does he agree that that means breaking down the barriers between healthcare and social care? Does he also agree that the cultural change that the Prime Minister referred to in relation to hospitals applies as much to community, primary and social care?
	The number of the noble Lords who are here at this time of night to listen to the Statement indicates that many noble Lords have a great deal of interest in this. I ask the noble Lord to pursue through the usual channels the opportunity for an early and lengthy debate on the Francis report. That would be very much appreciated by noble Lords.
	We cannot turn back the clock and undo the damage at Stafford but we owe it to those who have suffered, to the people of Stafford and to the country as a whole to work together to act on this report and prevent a scandal like this from happening elsewhere. We on this side of the House will play our part in making that happen.

Lord Hill of Oareford: My Lords, I am grateful for the way in which the noble Lord, Lord Hunt of Kings Heath, put his questions and responded. I agree with what he said at the outset about the NHS representing the best values of our country, his important point that these awful things are not typical of everything that goes on, and that there are many hundreds of thousands of people delivering great care. He is right to remind us of that but also right to be clear, as he was, that together we need to face up to the problems that this extremely important report from Mr Francis has uncovered. I also take the noble Lord's point, which the Francis report mentions, about the dangers of over-frequent reorganisation. All parties need to be conscious of that, and I think that all politicians are sometimes guilty of it. One of the great lessons of all systems is that the simpler and more stable one can keep them, the better the framework in which people have to operate.
	I agree with the noble Lord about the importance of patients having a strong and independent voice. I think that is the way he put it. I certainly know from the world of education that it is hugely important to find ways to ensure that parents and those who care and have to use the services can plug into the system and can help to hold those services to account, and the findings in the Francis report underline the effort that we need to make to ensure that that happens.
	On the noble Lord's specific question about Healthwatch, I know that my noble friend Lord Howe spoke yesterday evening about some of the ways in which we are trying to strengthen the role and voice of patients and the public through local Healthwatch. We are determined to ensure that local Healthwatch can act as an independent and powerful voice for patients in local areas, and we are creating Healthwatch England so that there is a national voice for patients as well. I agree with him about the importance of that.
	I also agree with the noble Lord's emphasis on having compassion at the heart of medicine. Again, that point came out of the Francis report.
	On the question of skills, numbers and finances, the noble Lord is right to say that that question was put to my right honourable friend the Prime Minister by the Leader of the Opposition earlier on. My right honourable friend said that he believes that the resources that are going into the health service, which are increasing, are in place. I agree that we have to ensure that every ward has the right mix and number of doctors, nurses and healthcare assistants so that staff have the time and the skills to ensure that they are providing safe and effective care. I believe that the recent nursing vision, Compassion in Practice, set out new measures to help to ensure that locally, but I know that my right honourable friend the Health Secretary will study the report to see whether there are other steps that may need to be taken.
	On the subject of the chief inspector, again there is an analogy with schools. Having a figure that we can identify as a champion of standards is going to be a good step forward. He or she will be part of the CQC. The precise process by which they operate will need to be sorted out in detail over the days and weeks to come, but obviously we will share that with the noble Lord and other interested Peers.
	On the noble Lord's question about the National Patient Safety Agency, I understand that that was merged into the Commissioning Board to try to make safety integral to the commissioning of care. We need to ensure that happens.
	On the merging of Monitor and the CQC, another important question, the noble Lord asked for reassurance that a decision on that has not already been taken. I can say to him that it has not. We have already made clear that we aim to create more generally a single failure regime under which organisations can be held accountable for failures in care, as well as with their finances. Francis's recommendation to merge those two organisations is one that we will consider. There are clearly questions about the balance between making sure that quality is high and money.
	On the noble Lord's important question about the registration and training of healthcare assistants, we are certainly committed to supporting healthcare assistants and support workers to provide proper, compassionate and safe care. We will take Francis's recommendations seriously, but the report in another place also points out, rightly, that compulsory statutory regulation does not necessarily prevent poor care, and that cultural issues-one of the recurring themes of the report-are indeed central.
	The noble Lord asked about the effect on the quality of care of the process of moving to foundation trust status. Like the previous Government, we believe that foundation trusts can make our hospitals more accountable and responsible and better able to take decisions. However, the move to trust status for Mid Staffs was at the expense of patient care, and that was clearly wrong. I agree with the noble Lord that it is a move that must not be rushed and that patient care must come first. In answer to his question: yes, there will be no pressure. The essential requirement is that they be ready.
	In response to the noble Lord's question about targets, I accept-and this is clearly the case in all sorts of areas-that there is a place for sensible targets. We also know and accept that if we have the wrong targets, or too many of them, there is sometimes the danger of perverse incentives and confusion as well. As the noble Lord said, getting that balance right is extremely important.
	On integrated services, it is important to make sure that we are able to look across the piece, and that there are not the barriers that he described. Of course I recognise the amount of interest in the subject. I know how much expertise there is here, and I am very happy to see whether we can find an opportunity for a fuller debate through the usual channels, which I think would be well received by noble Lords.

Earl Attlee: My Lords, I remind the House of the benefit of short questions in order that my noble friend the Leader of the House can answer as many questions as possible, which I am sure he is very keen to do. If necessary, I can help.

Baroness Jolly: My Lords, we, too, welcome the Francis report, and the many recommendations that we believe will strengthen the whole NHS. In particular, we welcome Francis's recommendation of a statutory duty of candour: the duty of a clinician to explain and apologise when things go wrong. When and how does my noble friend see this being implemented?

Lord Hill of Oareford: As my noble friend said, Robert Francis certainly recommended a statutory duty of candour, and my right honourable friend the Secretary of State will give full consideration to that. So far, he has said that he will work through all 290 recommendations in the report, and that the Government aim to give an initial response within a month. Precisely what the timeframe will be on all these elements, I cannot say. As my noble friend will know, in the interim we created legally binding rules that require the NHS Commissioning Board to insert a contractual duty of candour into the NHS standard contract in 2013-14. That means that NHS hospitals will be required contractually to tell patients when they have been significantly harmed by a patient-safety incident during their care. Otherwise, I take my noble friend's point on board.

Lord Campbell-Savours: My Lords, the Statement says:
	"every carer, every member of staff will be given the opportunity to say whether they would recommend their hospital to their friends or family. This will be published ... where a significant proportion of patients or staff raise serious concerns about what is happening in a hospital immediate inspection will result and suspension of the hospital board may well follow".
	That is a very radical proposal. My question is very simple: will a member of staff making such a report have their name published, or will their contribution be anonymous? If it is not anonymous, this system will not work.

Lord Hill of Oareford: I understand the noble Lord's point. Like many things in this report, we will need to consider exactly how the details of the system will work. Generally, on whistleblowing and giving people the opportunity to make their views known, we have already taken steps to try to protect and support whistleblowers. We are funding a helpline to support them, we are embedding rights in their employment contracts, and we are issuing new guidance. We will be studying the report to see whether there are any further procedural or legal measures, and I hope that we will be able to provide more information to the noble Lord in due course.

Baroness Knight of Collingtree: My Lords, would that it were only the Mid Staffordshire hospital that was guilty of the kind of wrongdoing that we have been talking about tonight. My noble friend has made a wonderful, genuinely caring, speech about what has been happening and his determination to stop it. However, I feel very strongly about this, because I have tried for years and years, from 2002 onwards, to bring cases to this House. We should sometimes listen to people, here and in the other House, who bring cases before their House to be considered.
	As many Members know, I produced a long document of 26 cases of the various bad treatment of patients. I went to endless trouble to make absolutely certain that every fact I put forward was correct, and that each patient for whom I pleaded had given me full permission to raise his or her case. The noble Lord, Lord Hunt, might remember the occasion when I went to him with a long and detailed dossier of these cases. It was certainly not his fault, but a number of those 26 cases were never investigated at all, and I never got an answer. I even tried to get through this House a parents' protection Bill, which was quietly squashed at the time. My plea to my noble friend is that he also lets Members of Parliament, in one House or the other, be heard. They do not raise cases for fun but because of their feeling for the patients or relatives who have contacted them. I ask him please to listen in future, because what they say is of crucial importance.

Lord Hill of Oareford: I very much agree with the broad point that my noble friend is making. One of the recurring themes of the report is that whomever complaints came from-family or whoever-they were not being listened to. I am sure that my noble friend will have noted the part of my right honourable friend the Prime Minister's Statement that announced that there will be a complaints review, which will be jointly led by Ann Clwyd MP-that makes the point about Parliament being involved in this process-and Professor Tricia Hart, chief executive of South Tees Hospitals NHS Foundation Trust. We need to make sure that we have these proper mechanisms and that where there are concerns, they are raised and listened to.

Baroness Emerton: The report calls for NICE to devise tools to calculate safe staffing levels, which have already been mentioned this evening. The evidence is growing. A group of senior nurses has come together to collect the evidence. The evidence base determines that safe and cost-effective care is determined by the safe levels of trained staff-registered nurses-to support workers. Will the noble Lord the Leader of the House be taking from this report that NICE will be devising tools to determine safe staffing levels as an urgent requirement because until we get them right, we are not going to see safe care delivery?
	On the registration of support workers, one reads in the report that patients were suffering appalling neglect and mistreatment. Hundreds of people suffered from being given the wrong drugs because support workers were not trained. Please will the noble Lord take away the recommendation on the registration of support workers as a matter of urgency?

Lord Hill of Oareford: As I think I said in my earlier response to the noble Lord, Lord Hunt of Kings Heath, the registration of support workers is something that the Government will consider as part of their response to the Francis recommendations. We need to have well trained staff at all levels.
	On the noble Baroness's other point about ratios, I am sure that my colleagues in the Department of Health will reflect on what she said. Ultimately, decisions about staffing levels and so on need to be made locally, but I know that as part of this whole debate the department will be thinking in every way it can to try to make sure that all these sensible points are acted upon.

Baroness Williams of Crosby: My Lords-

Lord Harris of Haringey: My Lords-

Earl Attlee: I think we should hear from the Labour Benches.

Lord Harris of Haringey: The noble Lord the Leader of the House has referred to the fact that there is now to be a contractual obligation of candour on healthcare organisations. Presumably Robert Francis was aware of that in framing his recommendations, feels that it is inadequate and is advocating a statutory duty of candour, which, so far, the Government have resisted. I hope that policy will change. The noble Lord the Leader of the House also talked about the importance of an independent voice for patients. Given the suggestion that has been made about merging Monitor and the CQC, will he accept that it is therefore inappropriate that Healthwatch England, the national voice of patients, should be subordinate to that monster new body? Secondly, does he also accept that it is inappropriate, if you are to have an independent voice, that local Healthwatch is subordinate to local authorities, some of the organisations that they are supposed to monitor?

Lord Hill of Oareford: On the duty of candour, I said in my response the noble Lord's noble friend that the suggestion about a statutory duty of candour is something that the Government will consider in their response to Francis. I pointed out that there is already a contractual duty in place, but I understand the point that he makes.
	So far as Healthwatch England is concerned, I understand that that was debated at length. My noble friend Lord Howe is sitting here, and I am sure he will have heard the points that the noble Lord has made.

Baroness Williams of Crosby: My Lords, like many others, I am sure the House would like to ask the noble Lord the Leader of the House to pass on our appreciation of the very restrained and moving Statement by the Prime Minister which in many ways reflects his own experience of the National Health Service in respect of his son, which I shared in respect of the death last year in an NHS hospital of my son-in-law. One could not have asked for better treatment.
	In some ways, the tragedy of Mid Staffs is precisely that it is one of the few things that have lowered trust in the NHS, and that is a very serious outcome. The many relatives who waited for month after month and year after year for some kind of justice-there are echoes of Hillsborough in that-felt that they were not being listened to, despite the agony that they were going through.
	Let me very quickly say just a word about accountability. My only criticism of the Francis report, although I have not had the opportunity to read every word of it, revolves around that word "accountability". Accountability has to go to the very top. It cannot stop half way. I need to say quite loudly that two gentlemen have something to answer for, if only to comment on the recommendations and see if they meet the difficulties that have arisen in Mid Staffs. The first is Sir David Nicholson, the chief executive of the NHS Commissioning Board, who was present in a very senior capacity. I am not trying to blame him, but to say that I think his advice on how to avoid what happened then would be very valuable. The other person was Secretary of State in the last year of the period which the Francis report covers and is the right honourable Mr Andrew Burnham. Many of us-

Noble Lords: Order!

Earl Attlee: My Lords, I think we should hear from the Minister.

Baroness Williams of Crosby: Many of us during the course of the debate were obliged to listen to a very great deal of what I might call Twitter propaganda, and I think it is only fair to say that Mr Burnham has a responsibility to respond to this report.

A noble Lord: Too long!

Baroness Williams of Crosby: I am going to continue, so noble Lords had better get used to it.

Earl Attlee: My Lords, I think the sense of the House is that we would like to hear from the noble Lord the Leader of the House.

Noble Lords: Hear, hear!

Baroness Williams of Crosby: I shall complete my remarks.

Noble Lords: Order!

Baroness Williams of Crosby: I have much to comment about on this front, and I am going to finish my sentence. We all need to be responsible and accountable for making sure that no Mid Staffs ever happens again. That means that we may not pass the burden of responsibility to and fro. We all have to accept our common responsibility, and if that means abandoning party statements, so much the better.

Lord Hill of Oareford: I agree about the theme, which I think we have all accepted, that there is a common responsibility. One of the themes of the report is that we should not seek to single out individuals or particular organisations for risk of not seeing the bigger picture which, as my noble friend said, is that there is a common responsibility.

Lord Cormack: My Lords, for some 35 years, my constituents in South Staffordshire had good healthcare from Stafford hospitals. It was only in this very bad period that we had these appalling stories, and we all feel ashamed. It is important to recognise that there was good healthcare before, and there must be after. In that context, will my noble friend assure me that all those appointed to boards of hospitals will receive adequate training about what their true responsibilities and powers are?

Lord Hill of Oareford: That is an extremely important point, and it is part of what the Government need to do in their response in ensuring that boards accept their responsibility and understand what it is. It is not just to do with running hospitals economical and efficiently; above all, it is to do with patient care.

Lord Patel: My Lords, I have questions relating to two areas in the Statement on which a decision has already been made. The first relates to the Prime Minister asking Sir Don Berwick to advise on zero harm. The noble Lord the Leader of the House did not answer the question asked by the noble Lord, Lord Hunt, about whether it is now the Government's intention to re-establish the National Patient Safety Agency. I declare an interest as I was chairman of the National Patient Safety Agency for four years. I have worked with Sir Don Berwick in my hospital. The implementation of zero harm is possible in patient care in certain areas, but to implement it requires an organisation in every hospital and a national organisation to monitor it. How is intended that that will happen? The second decision was to ask Sir Bruce Keogh, the medical director, immediately to investigate hospitals that have high mortality rates. That implies that we know which hospitals they are. Will the noble Lord the Leader comment on that? I hope that investigation will also include all higher mortality rates including still births, neonatal deaths and infant deaths.

Lord Hill of Oareford: My Lords, perhaps I responded elliptically to the noble Lord's first point about whether we had plans to reintroduce the agency by saying that it had been merged. We do not have plans to reintroduce it. On his second question about Sir Don Berwick, it is for him now to work out how he will carry out his review and come back to us with his recommendations. On his third question about the immediate inquiry being carried out by Sir Bruce, mortality rates are the factor he will take into account in identifying the cases that would most benefit from his urgent attention.

Lord Willis of Knaresborough: My Lords-

Lord Wills: My Lords-

Earl Attlee: My Lords, I think we should hear from the Labour Benches.

Lord Wills: My Lords, I welcome the Minister's emphasis on the importance of involving patients and their relatives more centrally in decisions about their own care. Does the Minister think that principle should be extended throughout the NHS, including the new policy on value-based pricing for new medicines?

Lord Hill of Oareford: I certainly take the point that that principle is one we need to apply in our response. As regards the specific question, my noble friend Lord Howe will follow up with the noble Lord.

Lord Willis of Knaresborough: My Lords, Francis quite rightly recognises the contribution made by healthcare support workers. He makes seven recommendations about how they should be included within a reinvigorated National Health Service. The report makes the claim that healthcare support workers have to be properly trained to appropriate standards. I want to ask the Leader of the House two questions. First, will those standards be set independently, by the NMC or another body, and not the department? Secondly, will he guarantee to the House tonight that, whatever those standards are, the training will be mandatory, not an optional extra?

Lord Hill of Oareford: My Lords, at the moment I cannot give the specific assurance my noble friend would like because the Secretary of State for Health has to look at all the recommendations, working out how to respond to them and the most sensible way forward. However, it is clear that the standards would need to carry weight and be recognised as doing so. I know my right honourable friend the Secretary of State will reflect on that and that my noble friend Lord Howe will have heard the points the noble Lord has made.

Baroness Masham of Ilton: My Lords, can the Leader assure me that there will not be bullying and that there will be kindness? Kindness does not cost money. Nurses should be kind and treat patients with dignity.

Lord Hill of Oareford: My Lords, I could not agree more. One of the things that are most distressing when one strips away everything to do with structures is the lack of common humanity. That is the most extraordinary thing. I agree very much with the noble Baroness about the importance of compassion.

Council of Europe: Local and Regional Democracy
	 — 
	Question for Short Debate

Tabled By The Earl of Dundee
	To ask Her Majesty's Government, following the United Kingdom's recent chairmanship of the Council of Europe, what plans they have to assist local and regional democracy in Europe.

The Earl of Dundee: My Lords, in my remarks today I would like briefly to connect together three themes. The first is the huge importance of local democracy-its obvious and immediate relevance; its scope for enhancing national and international democracy; and conversely regarding the latter, its ability to reduce or remove what to some extent has lately become alienation or even mistrust. Secondly, there is the role of the Council of Europe in promoting local and regional democracy. Thirdly, there is the opportunity which our Parliament and Government now have to assist, to guide, to lead initiatives of good practice and to nurture and encourage progress.
	The European Court of Human Rights was able to sharpen our focus upon local democracy. For its recognition of the right to individual petition puts state and citizen on an equal footing. However, it took the devastation of two world wars for that notion to be adopted. Previously, it had been assumed that the state would always come first even if that precedence infringed the rights of the individual. Then after European Union expansion in 2004, there was the Warsaw Summit declaration in 2005. This calls for the reinvigoration of democracy, both nationally and internationally, through its strengthening at local and grass-roots levels. Not least, therefore, have those two interventions helped to revise political theory and how we view the Council of Europe's affiliation of 47 states. For now we evaluate the worth of political delivery much more in terms of the well-being of families, communities and people in their daily lives. To those priorities we believe governments and institutions should play second fiddle; yet at the same time we know perfectly well that thereby the role and sovereignty of nation states need not be in the least undermined or diminished.
	National democracy is never short-changed by local democracy. In fact, the reverse is the case. For more often than not its quality and validity reflect a combination of local results in the first place. It follows from this that the advance of local democracy or active citizenship is no longer speculative or part of some new political advocacy. Instead, it has become a consensual matter for all of us to see how best to put it into practice within Europe's present stage of development.
	This leads to the role of the Council of Europe. Already that institution has made a wonderful and unprecedented contribution to stability, human rights and the rule of law. Its membership now includes most of central and eastern Europe. We are enormously grateful. However, its current dealings with local democracy should be changed in certain respects. Within the Council of Europe itself there should be a common agenda. This is lacking. Such a common agenda ought to seek to implement the Chavez report-agreeing priorities annually, undertaking activity competently and transparently and adopting administrative structures which correspond to the new approach.
	Here I pay tribute to my noble friend Lady Hanham. During the United Kingdom's six-month chairmanship of the Council of Europe last year, she was the Minister responsible for local democracy. A very good start was made in drawing attention to these prescriptions. As a result the Committee of Ministers has recently agreed to the case for much better internal co-ordination and has referred matters arising from the Chavez report to an expert group. For the reforms he encouraged I also pay tribute to Keith Whitmore, who retired last year as President of the Council of Europe's Congress of Local and Regional Authorities.
	Yet the Council of Europe's two main branches, the congress and the parliamentary assembly, still do not work enough together. They should do so, and there ought to be an annual procedure for that. Will the Committee of Ministers call for this? What predictions this year does my noble friend make for the progress of the Chavez report itself? In what ways will she and her department be able to help that process?
	Then, started in 2006, there is the Council of Europe's Centre of Expertise for Local Government Reform. Already to states within central and eastern Europe it has provided much useful guidance on the nuts and bolts of local government systems and methods. This year it starts a new venture and facilitates a working programme between parts of the United Kingdom and parts of Croatia, a country about to become the 28th member of the European Union this July. Within the programme certain regions and cities directly work together. The agenda includes mutual trade, education and cultural exchanges and those on good practice for sustaining stable communities. It is a great pleasure for me to assist this programme as Scottish consul for Croatia, as well as in my capacity as chairman of this Parliament's all-party group for that country. Thereafter, and between different cities and regions elsewhere in Europe, the centre aims to encourage further working synergies. Clearly, those expedients serve to strengthen local and regional democracy. What plans therefore have the Government to support them?
	Germane to the quality of local democracy in Europe, there are also inquiries and policies currently embarked upon by the Government for the benefit of the United Kingdom. Two such include the well-being of communities and the promotion of active citizenship. Both considerations lie at the centre of effective local democracy. What intentions on these subjects have the Government to use, once information is available, our own United Kingdom analyses and recommendations to assist Europe? During an economic crisis some might possibly object that it is wrong to spend time and effort on local democracy at all. However, the complete opposite is surely the case. For improved local democracy reduces costs and facilitates growth, initiative and creativity. At the same time it is also what is needed to protect values and rights. The United Kingdom has much experience in this field. Last year, our Council of Europe chairmanship pointed the way. That direction we must now follow with confidence and vigour.

Lord Judd: My Lords, I am sure that the whole House is grateful to the noble Earl for introducing this debate tonight. He has great experience and tremendous commitment to the Council of Europe, and it is good to hear him speak on the subject. There will be other speakers in this debate and in the gap who will bring a great deal of intimate knowledge and commitment to our proceedings.
	Looking back on my own time, some years ago in the Council of Europe, I am convinced that it has a potentially huge contribution to make in strengthening democracy across Europe, not least in some of the former Soviet bloc countries. At the end of the Second World War, the founders of the Council of Europe-indeed, those behind the whole European initiative, including the whole European Union-not only saw democracy as key to the future stability of the continent but also saw that if democracy was to work it was not simply parliamentary institutions and elections but all the other infrastructure that was so necessary, including the rule of law and, of course, human rights. They had a searing experience of a denial of human rights that led to, and was involved in, the Second World War and saw that as absolutely basic to stability and an effective democracy. So the European Court of Human Rights, to which the noble Earl made reference, was an essential part of this.
	I want to concentrate my short intervention on one very significant member of the Council of Europe-Russia. The extent of its pervasive corruption, the weakness of the courts and legal procedures at national, regional and local level, with a penal system that is appalling and enshrines some of the most barbaric treatment of prisoners possible, and the carefully neutered political role of the Duma itself, have significance for the quality of democracy and, of course, for the countries on Russia's borders. Here I turn to the north Caucasus. I was very much involved there as rapporteur on the conflict in Chechnya to the Parliamentary Assembly of the Council of Europe. Some people say now that things are better because there is order. We have to understand that, in so far as there is an appearance of order, it is the order of tyranny, oppression and fear.
	It is essential to recognise that extrajudicial killing still takes place on the say-so of those who hold power. Still intimidation of witnesses happens, and of the relatives of those who are being pursued. There is harassment across the whole nature of society for those who would wish to generate independent thinking.
	In the midst of all this, there are, of course, very brave and courageous people who are trying to put things right. There are lawyers, academics and professional people who make their stand. There are, of course, voluntary and non-governmental organisations-and I think particularly of Memorial, one of the most courageous organisations that I have ever encountered, with a tremendous degree of professional competence and excellence that it has built up over the years. These organisations make civil society and are absolutely essential to a functioning democracy, but they are being deliberately curbed within Russia and places such as the north Caucasus.
	With the quality of democracy at local, national or regional level, it is terribly important to be able to bring cases before the European Court of Human Rights. Memorial and others have done this. There are an impressive number of judgments by the court that uphold the complaints that have been brought. Those complaints go to the Committee of Ministers to see to the follow-through and the implementation by Russia of the findings of the court. For year after year the performance of the Committee of Ministers has been lamentably weak; it goes through the formalities of reprimanding or criticising Russia, but it has really not put the muscle or force of argument as it is essential that it should have done. I ask the Minister for a specific assurance that, if we are to make democracy work in these areas, we must recognise the importance of the European Court of Human Rights, which needs to be properly resourced for its work, but also make sure that the Committee of Ministers follows through and does not let Russia off the hook in its failure to implement what is recommended by the judges.

Lord Greaves: My Lords, I feel a little bit out of place, in that I am not expert at all in the matters of the Council of Europe and local and regional government in Europe, or indeed the Congress of Local and Regional Authorities, although I have spent a lifetime reading about their activities of interest. I was very grateful for the extensive briefing from the House of Lords Library, which alerted me to all kinds of things.
	I shall speak very briefly about these matters, to echo the generous commendation of the noble Earl, Lord Dundee, of my Liberal Democrat colleague, Keith Whitmore, for the enormous amount of work that he has done on these areas over many years, and in particular for his work as chair of the congress last year. I have a note here from the secretary-general of the congress, which says:
	"First of all the tremendous work of Keith Whitmore should be mentioned ... he does not seem to be appreciated enough in his home country".
	That may be so. I remember Keith when he was a bright leading light of the Young Liberals in Manchester, and a very important person in the resurrection and regeneration of liberalism in that historically very great Liberal city.
	I shall say no more about that, because I am taking part in this debate as an excuse to say a few words about the north of England as a very important region in this country and in Europe. In general, the larger countries of Europe have regional governments. The systems vary a lot. In Germany, with the very strong länder, there is a fully fledged federal system entrenched in the constitution of the country. Spain is constitutionally a unitary state, but it has extensive though asymmetric devolution to autonomous democratic regions. The strongest of these, particularly Catalonia and the Basque country, approach something akin to the status of regions within a federal system.
	In France and Italy there are democratic regional authorities that are more akin to very large local authorities in their constitutional status and some of their functions. Nevertheless, they are important bodies within their spheres. Here we have a real constitutional mess. We have devolved elected bodies in Scotland, Wales and Northern Ireland. In Scotland in particular, regardless of what happens in the forthcoming referendum, the Scottish Parliament and the Scottish Government are approaching the status and powers that they would have in a fully federal system.
	In the rest of England, apart from Greater London, we have nothing at all. In Greater London, we have a sort of city region with the Greater London Authority, the mayor and the London Assembly, but in the rest of England there is zilch, so our system is a bit like that of Spain except that throughout England we have nothing at all. I would argue that the north of England is a distinctive region. Anybody who visits it knows that it is a distinctive region within both this country and Europe. Socially, culturally, environmentally and economically it is regionally distinctive and forms a regional unit.
	In the three subregions of the north of England-the north-east, the north-west and Yorkshire, although they may have slightly wonky boundaries at the moment, but never mind-regional bodies have developed on an ad hoc basis over the past few decades, which resulted in the regional development agencies, which had considerable influence and finance but were not democratically accountable. Regional assemblies were set up in these regions which, if they were democratic at all, were not directly democratic. They were indirectly democratic and they included representatives of business, trade unions and so on. Nevertheless, they met and they represented the regions, although it is fair to say that they did so in secrecy-not of their own volition-because nobody noticed them. I should say that I was a member of the North West Regional Assembly for a while.
	In November 2004, there was a referendum in the north-east to set up a formally elected north-east regional assembly. The proposal was thoroughly trounced by some 696,000 votes to 197,000 on an almost 50% turnout. That really killed off the idea of elected democratic regional assemblies or government in the north of England for quite some time. The Conservative spokesman for the regions at that time was Bernard Jenkin-at least they had a spokesman for the regions at that time, so they must have recognised that regions existed. He said that,
	"the whole idea of regional government has been blown out of the water",
	and that what was being proposed was a "toothless talking shop". Both those statements were effectively true. The scheme that was put forward was flawed, the proposals were feeble and the Government at the time failed to put it in the context of what they wanted for the country, or at least for the north of England.
	I argue that it is time to start talking about regionalism again in the north of England. I remember that back in the 1960s a group of Liberal candidates in the north-west, of whom a leading light was my noble friend Lord Tordoff, produced a report on regional government in the north-west. That started the ball rolling as far as our party was concerned and had considerable influence.
	A body which has been founded fairly recently-it is not a Liberal body-is the Hannah Mitchell Foundation, which is based in and around Huddersfield, the general-secretary of which is Professor Paul Salveson, who is not a political colleague of mine but is a friend. The body has as its first aim,
	"influencing the political agenda to support elected regional government for the North".
	Its second aim is that of developing,
	"a distinct 'Northern' politics based on Labour, Co-operative, Radical Liberal and other progressive traditions".
	I can associate with at least three of those descriptions. Although Professor Salveson is a socialist, and says that he is, I think that a lot of his views, and the views of his foundation and of his campaigning, are ones with which radical Liberals will go along.
	A serious debate has to begin again in the north of England. In particular, we need to think about the future and whether, if Scotland is to be an autonomous unit-I do not use the word "independent"-in whatever form, and if it is to have considerable financial powers and influence, effectively the people of Scotland will be running their own affairs to a very large extent. Whatever happens in the referendum, in the coming years it seems that the north of England will have to look at itself and ask, "Are we actually three subregions comprising the north-west, the north-east and Yorkshire, or should we get together as the north of England and say that we are twice as big as Scotland in population, and that if Scotland can do this, why cannot we in the north of England do it?".
	Perhaps that is the future. That is the thought I want to put in the minds of your Lordships this evening. Then we can join in with all the Europeans who talk about regional government and talk to each other from regions in Europe. We can be one of them. At the moment, we have more and more direct rule from London and it is not satisfactory.

Baroness Wilcox: My Lords, I am delighted to speak tonight, albeit briefly, in support of my noble friend Lord Dundee and his championing of local democracy, the role of the Council of Europe in promoting such local democracy and the opportunity which our Parliament and Government now have to assist local democracy in Europe and to guide and lead institutions and good practice initiatives and to encourage progress.
	I am a very new delegate to the Parliamentary Assembly of the Council of Europe. For the past few years-certainly for the past two years when I was the Minister for Business and Intellectual Property in this House-I seemed to be in the European Community every week. I thought that it was the biggest show in town. We worked very hard to achieve a single patent and eventually got it after we had been at it for 41 years.
	Before that, when I chaired the National Consumer Council, I worked with DG11 in the European Community on consumer empowerment and rights. During that time, things happened in Russia-the noble Lord, Lord Judd, referred to them. I went there several times in connection with the European Community programme for the democratisation of Russia. Therefore, I felt that I would be perfectly okay when I got to the Council of Europe. However, I have been there only once and have already realised that I do not know a thing. It is enormous. Forty-seven countries are involved in it, from the Russian Federation to Iceland, Georgia, Turkey and Azerbaijan. The range, size and shape of the countries involved, which represent 800 million people, is extraordinary.
	As we have heard, the work of the Council of Europe concerns human rights, the rule of law and democracy. I took great pleasure in reading Winston Churchill's speeches and learning how this all started and how we got to where we are today. It is a great honour and delight for me to speak on this matter tonight. I have a lot to learn.
	Following the UK's recent chairmanship of the Council of Europe, the priorities of the current chair, Andorra, are very much the same: that is, improving local democracy and building people's capacity to participate in grass-roots democracy, which chimes with our Prime Minister's vision of a big society. Andorra wishes to ensure that democratic principles are established at the lowest level as a solid foundation for national-level democracy and the rule of law. Improved local democracy reduces costs and facilitates growth. It protects values and rights. We in the United Kingdom have much experience in this field and we can certainly lead the way in this work. What plans do the Government have for all this to happen within the area of which we are speaking?
	The reason I wanted to speak tonight was not only to support my noble friend and colleague because I believe that what he is saying is absolutely right, but because I believe deeply that we need stable markets and stable economies with which to trade. We need to trade our way out of recession and this is a wonderful way for us to do it. We have the talent, the background and the knowledge to help them bring forward local and regional democracies. If we are able to do it, we will prosper. Our small and medium-sized businesses will feel safe to trade in some of the 47 countries where, at the moment, they would be terrified to trade. This is really important. The Local Government Association's idea of a team-UK approach to the Parliamentary Assembly of the Council of Europe is a very good one. We have a wonderful opportunity which we should not miss.

Lord Kirkhill: My Lords, I rise with considerable pleasure to thank the noble Earl, Lord Dundee, for introducing this debate. We do not talk about the Council of Europe often enough in this Chamber. Indeed, we do not talk about external organisations often enough. The debate gives us an opportunity to say something about this important body. I emphasise at the outset that the Council of Europe does not, as such, have a statutory authority, but it is the guardian of the Convention on Human Rights and there is, of course, the court in Strasbourg.
	A glance at the recent history of the Council of Europe gives an indication of its place in the scheme of things today. In 1989, which is going back a bit, President Gorbachev made his first major European speech. He made the speech in Strasbourg and his theme was that the Council of Europe could become Europe's common home. What prompted him to develop that simply put theme? Europe's new democracies were a considerable distance from membership of the European Union which was, without doubt, their ultimate aim. It still is, although most have now been able to join. It therefore fell to the Council of Europe to monitor their political and legal aspirations, to keep in touch with the new development and to attempt to assess the legal difficulties some of these new democracies faced, to which end the Committee on Legal Affairs traversed most of Europe much of the time, perhaps for too many months in my own case.
	I am getting past making relevant contributions in your Lordships' House and I forgot to say that the noble Earl, Lord Dundee, has played a significant role in attempting to develop within the European framework a prison system that is tolerable and humane. He has pushed very hard for change in certain areas. It is correct publicly to state that and to commend the noble Earl for those endeavours.
	The recent UK chairmanship of the Council gives an opportunity to decide on future regional and local initiatives. Does the Council envisage an association with the Maghreb states? Do the Government envisage the geographic delineation of the Council to move further eastwards than it presently extends? Does the Council feel that its local government-that is to say bringing together the difficulties envisaged by some local authorities and placing the question to others for amelioration-has always been rather cumbersome and not likely to achieve any positive result? These matters should be discussed.
	The Council of Europe now finds itself in a position where most of the aspirant states that were young democracies have now been able to join the European Union, which was always their principal aim. They are now much more interested in supporting initiatives of the European Union than they are of the Council of Europe. This diminishes the current role of the Council and its European responsibilities, other than maintaining and underpinning the court in Strasbourg. It is important to understand that the Council of Europe today is more criticised, rather than supported, than was ever the case in the past. These are defining days for the Council of Europe and I await with interest the Minister's response to these few remarks.

Lord Sheikh: My Lords, I thank my noble friend Lord Dundee for securing this debate. Winston Churchill was the first to speak about the benefits of creating a Council of Europe, so it is fitting that the Council was established by the treaty of London. The Council of Europe was founded upon the principles of upholding democracy and civil liberties. Since its creation, the Council has continued to adapt and expand as a means of tackling the common challenges facing the continent. The streamlining of the Council of Europe's activities in support of local and regional democracy was one of the priorities of our Government's recent chairmanship. This included efforts to reach a consensus on the establishment of a single programme of the Council of Europe's activity on local and regional democracy, to be overseen by the Committee of Ministers. The Congress of Local and Regional Authorities has an important role to play in achieving this aim. It represents a distinct and unique form of grass-roots democracy. It also represents local authorities across all 47 member states.
	In 2010, a British councillor was elected as president of the congress. It is the first time that this position has been held by a Briton. This branch of the Council of Europe, in conjunction with increased co-operation with the parliamentary assembly and with Governments, can improve the lives of citizens in member states. The priorities for each year concerning local and regional democracy should be agreed upon in an open and transparent way.
	The 2011 Chaves report correctly stated that due to the challenges in an ever-changing world, the level of interrelation between local, regional, national and international institutions must be strengthened. This suggests that multi-level governance is vital for Europe to meet the global challenges facing the continent.
	The Reflection Group, chaired by Felipe Gonzalez, previously stated that,
	"in a multilevel governance system, each level of authority-European, national, regional and local-exercises its powers according to its own legal responsibility".
	Each decision-making body should act within its powers. The promotion of local and regional democracy should be considered as an essential priority, thereby enhancing its key role in the consolidation of democratic processes in Europe and bringing good practices to other regions of the world. I should be grateful if the Minister could inform your Lordships' House of any recent dialogue Her Majesty's Government have had concerning this issue with the current Andorran chairmanship of the Council of Europe.
	The Chaves report also stated that the elevation of local and regional democracy in Europe is a fundamental part of the democracy pillar and highlights the synergies required between the Committee of Ministers, the Conference of Ministers responsible for local and regional authorities, and the congress. It is for these reasons that the Chaves report should be fully implemented.
	The reforms instigated and continued under the British chairmanship of the Council of Europe with regard to local and regional democracy aim at avoiding duplication, suppressing red tape and maximizing the utility of resources. The Kiviniemi report recommended budget austerity as a result of the current economic crisis. The report also called for greater visibility of the Council of Europe's work on local and regional democracy. Greater transparency will lead to citizens having increased confidence in the workings of the Council of Europe.
	It is important that an annual report be published recording the allocation of funds and the priorities for the coming year. This will lead to greater value for the taxpayer and more efficient spending. I am pleased that the Department for Communities and Local Government regularly publishes transparency reports on its website, showing how and where any sum of more than £250 is spent.
	In order to strengthen local democracy and give value for money to European taxpayers, efforts to reform the Council of Europe's work on local and regional democracy must continue. Achieving strong local governance is vital to the Council of Europe's democracy agenda. The Council's support for improving local democracy is in accordance with the European Charter of Local Self-Government and the "Twelve Principles of Good Governance at Local Level". It follows that reinforcing local democracy will lead to the reinforcement of the local economies of Europe. It is therefore vital to continue the process of streamlining the Council of Europe's activities in support of local and regional democracy. I look forward to learning more on the progress of the single programme as proposed by Her Majesty's Government.
	Finally, I support the comments of my noble friend Lady Wilcox regarding more trade with European countries.

Lord Prescott: My Lords, I congratulate the noble Earl on securing this debate on the Council of Europe, in which we have had some activities in the past. He referred to his concern about democracy in its national context, and I, as he knows, have been actively involved in the national democracy in one particular country, Armenia. He will recall that the elections were held for the President of that country. I was the leader of the Labour delegation and appointed to be the rapporteur for Armenia for one of the committees of the House. I went to that country during those elections to observe. I have to tell the noble Earl that the result created a riot; 10 people were killed and 130 were thrown in jail, under the threat that they were usurping the powers of the state. I was sent by the Council of Europe to see what had happened and what we could do about it.
	My main influence related to the fact that Armenia had entered into an obligation under the human rights convention to observe the democratic process. I could see, on a very quick visit there, that most of those rights had not been observed. It was an eastern European country coming out of being a communist state and wanted a kind of social democratic European stature. It was therefore concerned to make the changes. I also found that I had to convince the President and the rest of Armenia's Parliament to rewrite the laws on public protest. I got the 130 people out of jail. The election law was rewritten, as were the laws regarding the press and freedom. Even the judiciary was changed in that process. I congratulate the Parliament in that country for seeking to do those things very quickly.
	What was the power and influence that enabled that to happen? It happened largely because the country had signed up to an agreement, and I was able to say, "You have an obligation under your membership of the Council of Europe, and you must observe them, or I will have to report back to the Council that you are not observing them. The Council of Ministers would have to take some kind of action". When European rights were being used to bring about a more democratic framework, there was a stupid argument going on in the other House about whether prisoners should have the vote and whether, therefore, we should withdraw from the convention on human rights.
	What may be different in this country is certainly different there. Funnily enough, in Armenia they do not give prisoners the vote, but on the prisoner issue a number of routes can be pursued. It is the people who want to make the issue to leave Europe. Most of them thought they were in the European Union. It had to be pointed out to them in the debate that this was not the European Union but the Council of Europe, and it was different. Those circumstances are a very important part of maintaining democratic accountability.
	What is the position now? We have gone through all sorts of manoeuvres and changes and the Court still accepts that we have got it wrong and wants to hear an alternative from us. What is the alternative? What are the Government doing? Are they going to observe the convention on human rights? If not, they can leave the Council of Europe, because the obligation is on Britain to observe human rights. I do not know where the Government stand on this at the moment. Perhaps the noble Baroness can tell us.
	Next week I return to Armenia with a delegation to observe the new presidential elections. I certainly hope that it will go much better. I certainly have more confidence that these changes will make the election more democratic than it was on the last occasion. I am encouraged by the independent group of observers at last year's election, who reported a 62% turnout-a pity we could not get that here, but let us leave that aside-and a quiet and peaceful, vibrant election. Fabulous. I hope that will happen when I observe the presidential election. Unfortunately, one of the presidential candidates was shot in the shoulder last week, but he has insisted that the election takes place. I am waiting to see, since it will be a cold part of the year. I hope it will be a very colourful and peaceful election.
	The Council of Europe can play an important part in the democratic process. Sometimes we forget that, but they have obligations, particularly in eastern Europe, to measure up to the democratic accountability that they promised. Any of us who have had influence and been to these eastern European countries-I will leave Russia out of it for the moment-know that accountability is definitely needed. The Council of Europe can fulfil that role; it is a centre of democratic accountability. It can be used effectively, as it was in Armenia. There is still a lot of work to do, but it is not going to phase itself out and is desperately needed if we want democracy to continue in all parts of Europe.

Lord Liddle: My Lords, this has been a very interesting debate. It is always an education as well as a pleasure to listen to the noble Earl, Lord Dundee. This was true on this occasion as it has been on other occasions when I have heard him speak in this House. I join my colleague, my noble friend Lord Kirkhill, in commending him for his work in the Council of Europe.
	The Council of Europe is one of the great achievements of the post-war settlement. It was the first immediate product of Churchill's great call for Europe to unite. We have had many references to Churchill in the discussion tonight. "Europe unite" is still a very relevant call, not on the basis of conquest, as people such as Hitler and Napoleon had tried, but on the basis of democracy and human rights. In that cause, the Council of Europe has played a vital role. I wish the noble Baroness, Lady Wilcox, well in her new role at the Council. Strasbourg is a lovely place to go to, but this is also a very important role, as I think several speakers tonight have demonstrated.
	The Council of Europe has gone through several cycles in its life. It was very important right at the start, in the post-war era, then lost importance with the process of European integration through the coal and steel community and then the European Community. At that time a lot of cynics talked about it as a talking shop for superannuated politicians, and like all international organisations there are always problems of efficiency in the way they are run.
	The Council never lost its relevance, particularly because of the convention and the European Court of Human Rights. It is good that all we have heard in this debate is praise for this role. So often in our national life, all we get are brickbats thrown at us. It is important that while there is always a case for looking at how we can do things better and reform them, the essential principles are vital for the future.
	As my noble friend Lord Kirkhill reminded us, in the period when communism was beginning to collapse and Gorbachev made his great speech about the Council of Europe being Europe's common home-incidentally, I do not think my noble friend's speech was the speech of a man who does not have a lot more speeches to make in this House; it was a wonderful speech to listen to-that was a turning point in the Council's life. It had a very important role post the fall of communism. I saw it when I was an adviser at No. 10 and went to the Baltic states and saw the vital role that the Council of Europe was playing in helping the Russian minorities in Latvia and Estonia to establish their human rights. Without the Council's intervention, that would have been much more difficult.
	With the enlargement of the European Union, there are questions about what the Council's role now is. Of course, even with an enlarged EU, there is still a lot of Europe beyond the Council, and therefore it has an important and crucial role for the future. My noble friend Lord Judd reminded us-this is relevant to the post-communist world in that part of the globe-that democracy is not just about holding elections but about human rights and the rule of law. As part of that, the promotion of local government and local democracy is crucial.
	In many of these countries, local government is seen not as a democratic organ but as an instrument of the central state-an instrument of central administration to keep control, to sustain a political machine with jobs and favours, and to make sure that, when the elections come round, they go the right way. I saw that at first hand in some of the countries that I visited a decade or so ago.
	We have to be insistent that local government is not administration; it is about democracy and about communities deciding their future for themselves. Sometimes, to be frank, I think we should remember that in our own country as well. Democracy is not just about majority rule. It is important that the protection of minorities is pursued. On a visit to Ukraine, I saw the way in which the Tartars are treated in the Crimea. It is very important that these minorities are protected.
	I wish to make a couple of points on what noble Lords have said and I should like the Minister to expand on them. What is her view of what my noble friend Lord Judd said in his eloquent speech about the role of the Council of Europe in the North Caucasus?
	The noble Lord, Lord Greaves, made a very interesting speech, with which I totally agreed. I endorse his compliments on Keith Whitmore's role but I think that the rest of his speech is for another day.
	My noble friend Lord Kirkhill made an important point about the Council of Europe and the Maghreb. This will be one of the biggest challenges facing Europe in the future. The question is: what relationship could we have with those states?
	The noble Earl, Lord Dundee, posed questions about the implementation of the Chavez report, about whether the way in which the Council operates at present is internally coherent, and about promoting the work of bilateral exchanges. Those seem to be very relevant questions.
	At the end of the debate, we heard from my noble friend Lord Prescott about the real value of what the Council does. I suppose that its real value can be seen in situations such as that in Armenia, with my noble friend turning up on the doorstep to make sure that things do not go too awry. I do not mean that as a joke; I mean it seriously. That is one of the Council's values-that people of great distinction can give advice and hold people to the standards that they say they adhere to. That is absolutely crucial.
	This has been an excellent debate, and we look forward to the Minister's reply.

Baroness Hanham: My Lords, I hope that I shall be able to give your Lordships a reply. I think that I am going down with a parliamentary bug. I shall do my best but if I squeak at noble Lords, I hope they will forgive me.
	First, like other noble Lords, I thank my noble friend Lord Dundee for tabling this debate. It has, as usual, been a really good debate, with contributions from people who know what they are talking about and who have been closely involved in this subject. My noble friend is a significant member of the Council of Europe and the parliamentary assembly. I am enormously grateful to him because he provided me with great support during our chairmanship of the Council of Europe, when I tried to streamline-as my noble friend Lord Sheikh said-Council of Europe elements.
	An effectively operating local democracy is an essential feature of every modern democratic state. Good democratic governance is a foundation on which can be built prosperous and stable societies where there is respect for fundamental freedoms, human rights and the rule of law. The issue of human rights is very germane to the Council of Europe.
	It is for each individual state to decide its own governance arrangements, taking into account its own circumstances, traditions and culture. Across Europe there is, rightly, a wide diversity in the form that local and regional democratic governance takes, but throughout there are common principles at heart. This is the context in which states can work together to improve, strengthen and update their own democratic governance. All speakers today have demonstrated why that is important.
	As noble Lords know, and have said, the Council of Europe is potentially well placed to provide a framework and mechanisms to support this development of democracy. We referred to the Government's chairmanship of the Council of Europe. There were two main areas in which we wanted to achieve success. Our top priority was to reform the European Court of Human Rights, the importance of which we recognise. We successfully agreed measures to improve the working of the court.
	The second was to streamline the Council of Europe's activities on local and regional democracy. As the noble Lord, Lord Sheikh, said, the great thing about the Council of Europe is that its three elements managed to work entirely separately, not coming together at all. In many cases, these elements were doing exactly the same thing without joining together. It was becoming really important, to get the best out of them, to try to bring them together. Their usefulness was seriously impaired through a lack of co-ordination and collaboration between the three elements: the Committee of Ministers, the parliamentary assembly and the congress.
	As noble Lords have heard, these weaknesses were not straightforward. As has been said, there are now 47 member states in the Council of Europe. To try and get 47 member states to agree wholeheartedly to anything was not the easiest thing that we have ever done. In fact, the most we could do was to try and ensure that streamlining took place and that there was far more co-ordination and co-operation between them. The noble Lord, Lord Sheikh, made a powerful speech about what we were trying to do to ensure that everything came together.
	Tribute has been paid to Keith Whitmore, who was president of the congress. He was particularly well regarded and helpful when we were trying to do what we wanted to do. Bearing in mind that he was president of the whole congress, he was not able to do anything politically, but he helped us sensibly and sensitively with what we were trying to do. We cannot underestimate what he did. Keith never lost sight of the big picture and that is very important. I also want to put on record how we were helped by the UK delegation to the parliamentary assembly, particularly my noble friend Lord Dundee, and by the contribution of the honourable Member for Mansfield in the other place.
	Concerns were raised by the noble Lords, Lord Prescott and Lord Kirkhill, about where we go from here. I accept that there is still considerable room for improvement in the way in which congress and the Council of Europe work together. All the elements are now in place to make things better. The noble Earl asked about the future. The 47 states, through their ambassadors and after more than a year of discussion, agreed in November the programme of intergovernmental work on local and regional democracy. That implements much of the substance of the Chavez report, which was set in train by the Council of Europe precisely to see how it could work better. We have been co-operating with that, and there is now the prospect of Committee Ministers co-operating better in the future. With our influence still there in congress, I believe that we can continue to make progress.
	There have been so many stirring speeches. The noble Lord, Lord Judd, strongly drew attention to the lack of democracy in some parts of eastern Europe. I say to the noble Lord that one of the elements of the work of the Council of Europe is to educate emerging nations in democracy. The fact that they are sucked into the Council of Europe is becoming absolutely essential, because it gives them confidence and security not to be blown off-course and sucked back into the communist system. That is really important for us all for the future.
	The noble Lord, Lord Liddle, referred to the Baltic states; they all need their confidence boosted, they all want to be part of Europe, and they all want to have the same sort of democracy. One of the roles of the Council of Europe is do just that and to provide that support. Many things have happened in Europe over the last 50 years which we would all prefer had not happened, and that we can never forget about. If the Council of Europe and the European Union help with that, they are making a major contribution to our future.
	We intend to continue to assist in Europe by supporting the work of the Council. We are still working with Andorra. The chairmanship passed from Ukraine to us, and from us to Andorra, and there is a sort of seamlessness about it which I hope will continue.
	The new congress president, Mr van Staa, has also decided that he wants a better arrangement in the congress. One of our Belgian friends, Mr Lambertz, is committed to improving the structures, but the structures are only important because of the work that the congress and the Council of Europe does. That is going to affect all the things that people have talked about. The noble Lord, Lord Kirkhill, mentioned President Gorbachev's role, and he asked about the widening of the geographical area of Europe. It is probably as wide as it can go and we cannot take it too much further, but it does not mean that the Council cannot be encouraging.
	I was very interested in the influence of the noble Lord, Lord Prescott, in Armenia. That is not somewhere I would have connected with him, but it is good that it was there. He asked for my views on prisoner voting. It would be fair to say that we are still considering our position on that, and I am not going to be able to give him a firm answer to that question today.

Lord Prescott: We in this country have been in breach of our human rights obligations; it has been confirmed twice by the courts. Are we not doing anything about it?

Baroness Hanham: We will consider it, my Lords. There we are. I will just say to the noble Lord, Lord Kirkhill, that there are no plans at present to extend the Council of Europe further east or south, but I can tell the noble Lord that the congress and the Council of Ministers and the parliamentary assembly are all considering how they can contribute to the democratic processes in those parts of the world.
	I look forward to the outcomes of the better collaboration in the Council of Europe and the quality of the programmes which are going to be run. I know that congress is seeking to improve its preparation of the work that it undertakes and what it does in monitoring other states. We in this country are due to be monitored in the not-too-distant future and I understand that is to be done by Russia. So that should be interesting.

Lord Judd: I warmly endorse what the noble Baroness says about the importance of some countries in eastern Europe and Russia being involved and the part that that can play in building democracy. However, it all will be negated if, when it comes to the point, the Committee of Ministers does not rigorously pursue the matters indicated by the court as being wrong.

Baroness Hanham: My Lords, I agree. The Council of Europe has to grip the fact that it has to do things.
	We are very supportive of the European Court of Human Rights. After all, it was this country and Winston Churchill who set it up. We have always supported it and believe that there is a great strength in it. Although the changes that we managed to make were only administrative, the noble Lord is right that there is no point in just talking. People have to do things, otherwise we might just as well all save the fare of going to Brussels and Strasbourg.
	I am grateful to everyone who has taken part in the debate. I have tried to cover the points raised by everyone who has spoken but I am not sure that I have done so. I value the appearance of the noble Lord, Lord Liddle, and what he said. My noble friend Lady Wilcox will, I am sure, be a great contributor to the parliamentary assembly. She has a great deal of experience and is quite capable of putting it in its place, which is just as well.
	My noble friend Lord Greaves has taken the opportunity to "Christmas tree" into this debate, if I can put it that way, the subject of regions. He and I will never quite agree about that but, as I said in the House the other day, whatever you call it, the northern part of England is beginning again to become dynamic; there is plenty going on. I occasionally go to see what is happening up there. It is a lovely part of the world and it deserves to be brought out of its dormancy because it has always been a very important part of this country. Whatever we call it, whatever the noble Lord, Lord Greaves, calls it, we all love it.
	My noble friend Lord Dundee has done us a great service by enabling this debate today.

House adjourned at 9.02 pm.